This article analyzes how major corporations in the food, beverage and tobacco industries in Mexico have grown, as well as potential implications for the structure and efficiency of this sector. Building a labor productivity indicator for 12 branches and 38 classes of activities for the 1994-2008 time period, and applying these to the series obtained from shift-share decomposition analysis, revealed growing structural heterogeneity along with increasing efficiency for a limited number of activities. Similarly, the results indicate that the impact of workers changing sectors on the evolution of productivity varies as a function of the business strategies adopted, but was negative on the whole for the period, evidence of a regressive structural change in the sector.

INTRODUCTION

In the tradition of Latin American development theory, the structuralist school of thought has highlighted, through the writings of diverse authors, such as Aníbal Pinto and Celso Furtado, the importance of the homogenization of the practices and ways in which productive sectors are organized and function to achieve sustainable industrial development. Through a historical-structural approach based on the analysis of relationships between the various parts of the manufacturing apparatus, as well as the institutions charged with fostering their activity, the structuralists characterized this homogenization as a necessary pre-requisite to advance towards more mature forms of industrialization (Furtado, 1961; Pinto, 1965, 1970). Similarly, they paid special attention to using available resources, considered scarce, by promoting the shift of productive factors towards more efficient industries (Prebisch, 1950).

Two choices of structuralism are notable: the use of labor productivity as the main unit of measure to illustrate the heterogeneity in jobs and the key role of the industrial sector in productive development. The relevance of the first indicator has been upheld by various schools of thought, including, for example, Lewis' analysis of structural change as well as Kaldor’s (1978), which define the development process as the efficient use of resources that results in the shift of workers towards activities that are more productive. Secondly, industry produces carry-over effects and positive externalities for the rest of the economy, which is why it has traditionally been considered the motor of growth.

This article assumes that the heterogeneity of productivity levels in various branches and classes of activity in the food, beverage and tobacco sector in Mexico is a sign of structural deficits and vulnerability. In fact, it is understood that the asymmetries among the features of different branches and industries, as well as the concentration of manufacturing capacity in a small number of companies, are both the cause and consequence of poor articulation with the productive fabric (CEPAL, 2004). On the one hand, degree of integration is directly proportional to the power of carry-over effects and positive externalities that leading companies may have, and on the other, the competitiveness of these corporations is in nearly all global success stories associated with the efficiency of the suppliers of intermediate goods and components (Amsden, 2004; Farfan, 2005). Thus, at the sector level, the strategic complementarities¹ of the various productive segments are the basis on which to build dynamic economies of scale, which therefore determine how competitive specific industries are.

From that theoretical perspective, the objective of this article is to characterize the process of corporate concentration in the food, beverage and tobacco sector in Mexico and its implications for productivity levels and the degree of sectoral structural heterogeneity. Specifically, it aims to verify the hypothesis that in 1994-2008, the increased concentration, modernization and diversification of Mexican corporate groups was correlated with regressive structural change defined as the reassignment of the labor force to less productive uses. In light of the objectives of this article and the fact that a small number of activities contribute a large amount to total sector production and its recent dynamics, this text focuses on three branches: manufacture of dairy products, bread products and the beverage industry.²

The article is organized as follows. The second section describes the process of corporate concentration in the food, beverage and tobacco industry in Mexico and the third section estimates a labor productivity indicator for 12 branches and 38 classes of activity in the sector for the period 1994-2008 to analyze the evolution of the structural heterogeneity of the sector. The fourth section uses a generic shift-share technique to decompose the increase in labor productivity into two effects and address the topic of regressive structural change. Finally, the conclusions summarize the principal findings of this research.

CONCENTRATION, MODERNIZATION AND CORPORATE DIVERSIFICATION
IN THE FOOD, BEVERAGE AND TOBACCO SECTOR

In recent decades, the global agricultural and food system has changed profoundly, mainly through the industrialization of primary activities, as the role of the State has receded. Industry has been the backbone of this transformation by serving both as a source of demand for raw materials and inputs as well as the processer, distributor and marketer of the products. In the end, industry has prevailed over agriculture and large-scale agroindustrial complexes have emerged due to the nature of the activities carried out and the importance of economies of scale in realizing the full potential for profit.

Analyzing the various aspects of the recent global restructuring of the agri-food industry, Long and Buttel (1996) highlighted from the dominance of large companies free of state control, with no territorial ties, vertically integrated into agroindustrial complexes. Picking up this argument, Chauvet and González (2001) emphasized the concentration of concomitant economic power and explain how these complexes were formed "through the vertical operation of seed, biotechnology, agro-chemical, agroindustrial and food consortiums." They add, "The development of these consortiums will be based on strategic alliances, joint ownership, venture capital and company mergers" (2001: 1080).

The configuration of the global food system was based on the existing structures in the United States and Eastern Europe, which are highly integrated with the dominance of a few oligopolies and in some cases oligopsonies that function as industrial clusters (Heffernan, Hendrickson et al., 1999; Wilkinson, 2002). In this way, a few companies control the market from inputs to final products and the key factor is not production efficiency but rather economic power. Hendrickson, Wilkinson et al. (2008) argue in favor of this perspective, stating that the recent acquisitions in the United States (for example, Pilgrim’s Pride, second in the chicken industry, bought Gold Kist, third in line and Smithfield, number one in the pork market, bought Premium Standard Farms, ranked second in the market) may lead to capital reorganizations with short-term social and economic costs, slowing down transfers through the value chain. This evolution is therefore motivated by the survival of companies that wish to exercise their market power rather than by concentration that would make the supply capacity more efficient.

As a result, currently, in nearly all of the sectors of the agri-food industry, two or three large companies monopolize a large share of the global market starting from the early stages of the production process. Monsanto and Dupont, two U.S. corporations owned, in 2007, 38% of copyrighted seeds, while in the agrochemical sector, two European companies, Bayer and Syngenta, controlled the same percentage that year (Ribeiro, 2009: 116). The same is true of the tobacco industry, about which Meneses, Márquez et al. wrote: "The development of the international cigarette market is a story of the continuous concentration of companies: in fact, the best example of a globally concentrated manufacturing industry is the tobacco industry" (2002: 162).

To sum it up, the emerging global agri-food system is capital-intensive, centralized and consolidated, and extracts the natural resources and exploits the labor of less developed countries, selling the resulting products in markets where they can earn higher profits. The value chains are at all stages controlled by agents guided by the laws of the market making judgments based on industrial criteria, with the participation of oligopolistic companies, financial institutions and political and institutional agents (López, Solleiro et al., 1996). The complex integration of this set of actors occurs both within and outside of the strictly productive environment through alliances, agreements and mergers, following the logic of external vertical integration.

In Mexico, the trend towards corporate concentration in the food, beverage and tobacco industry mimics the international situation with certain caveats. Primarily, the fact that many of the products are perishable, the specific natural resources available in Mexico and the presence of historical business groups have allowed for nationally and even family-owned companies to develop and go global based on their dominance of the domestic market (see Table 1). As a result, the way in which the Mexican conglomerates that monopolize the supply are organized is, to a certain extent, sui generis.

Based on traditional works by Bellon (1980) and Leff (1974), Rendón and Morales (2008) describe the principal way in which Mexican companies associate economically as "…a set of companies – generally large – legally independent but related to one another through family, financial and community ties. There is a controlling company – a strategic partner that organizes and controls investment and financial decisions that affect payment and distribution of profit – and goods are transferred between the companies to achieve benefits and advantages for the entire group" (2008: 89).

A secondary aspect of the dynamics of these organizations permeated by cultural aspects is the logistical advantage based on efficient distribution networks, which has allowed for the diversification that has deepened material concentration, in many cases through the merger and acquisition of companies. One example to illustrate this process is the bread company Bimbo. Its corporate expansion dates back to the 1960s, began to take shape in the 1980s (in 1986, Bimbo acquired the company Continental de Alimentos S.A., which manufactured and distributed Wonder, one of its principal competitors in the national bread and bakery market) and has recently taken off through the growing diversification of activities (in December 2010, it acquired Dulces Vero, the producer, distributor and marketer of lollipops, sweets and marshmallows, the majority coated in chili powder, whose sales reached 1.1 billion pesos in 2009) (Grupo Bimbo, 2011).

In the dairy product branch of agroindustry, the implementation of the industrial-livestock technology system in dairy farming and the industrial processing of dairy byproducts, known as the Holstein model and imported from the U.S., has led to the following: "the companies that process pasteurized, unpasteurized and other presentations of milk products are experiencing strong productive concentration. In yogurt and condensed, evaporated and powder milk, as well as ice cream, there is also concentration in a small number of companies that make up an oligopolistic structure in this branch of industry" (Del Valle, 2010: 116).

To give an example, Grupo Industrial Lala, whose sales in 2008 amounted to 32.910 billion pesos (see Table 1), is a conglomerate of companies, with efforts as diverse as pasteurization and ultra-pasteurization factories, specialized transport companies, packaging factories, balanced foods, chemical products and spare parts, and so on, which has allowed it to assume an active role of and obtain better conditions for the import of inputs, including grains, feed, heifer cows, milking machines and cooling tanks. Lala has focused on implementing strict quality controls to set its products apart, especially in the fresh milk market where prices were liberalized in 1998 (García, 2001).

A third point is that in recent years, the corporate concentration in the sector has occurred not only through the consolidation and globalization of these national groups, but also simultaneously through the growing penetration of large transnational conglomerates in local markets. As such, there are currently notable duopolies with both national and foreign participation in activities native to the economic groups. Looking at the beverage industry, specifically soft drinks, Fomento Económico Mexicano (FEMSA) and Pepsi monopolize sales (see Table 1); in beer, Heineken, which acquired FEMSA-Cerveza in 2010 in exchange for giving up a 20% share of the global company, and Grupo Modelo control more than 98% of the domestic market (Irusta, 2007).

In the tobacco industry, in which six companies competed until 1975, by the end of the twentieth century, only two national companies, Cigarrera La Moderna (Cigamod) and Cigarrera La Tabacalera Mexicana (Cigatam), after being acquired in 1997 by two international giants (British American Tobacco and Phillip Morris of the U.S.) concentrated 99% of local sales. These acquisitions, which cost, respectively, 1.712 billion and 428 million dollars, aimed to convert Cigamod and Cigatam into export platforms for the North American market, taking advantage of lax regulations in the Mexican industry (Meneses, Márquez et al., 2002: 163 and 168).

A fourth feature to keep in mind is that the restructuring and modernization of Mexican companies as a function of highly concentrated market structures, despite their specificities and differences from international cases, has taken place with growing dependence on the external supply of raw materials derived largely from the lack of integration of the local productive chains (Castañon, Solleiro et al., 2003). In the period 1994-2008, the trade balance of the food, beverage and tobacco sector was negative in every year and accumulated a deficit of 26.1574 billion dollars, while the coefficient of dependence for grain imports went from 23.7% to 36.5% (FAO, 2014). In fact, comparing 2008 with 1994, the value of external purchases in the majority of commodities rose substantially: 574% in constant dollars for corn, 559% for wheat and meslin and 227% for sugar, in the same terms.³

Looking at Bimbo, for example, notwithstanding its nationalist marketing discourse in the local market, the conglomerate has consistently failed to form relationships with local corn producers, pointing to deficits in the national infrastructure, and regularly obtains a good portion of its inputs from foreign transnational food companies, such as Cargill, its supplier in Mexico of wheat, sugar and edible oils and fats. Another example is the tortilla industry, in which Grupo Maseca (Gruma), whose sales reached 35.816 billion pesos in 2008 (see Table 1), has around 71% of the corn flour market, but imported between 2000 and 2002 nearly 70% of its total sales value (Rendón and Morales, 2008).

Likewise, La Moderna, a world-class agroindustrial complex and leader in the research and development of smart seeds, imports seeds from abroad and only maintains unequal and intermittent relationships with domestic suppliers. Regarding the carry-over effect of this type of productive engagement for the national welfare, Chauvet and González ascertained, "Although linkages with national producers are an option for farmers, as suppliers of raw materials, their participation is subordinated to the interests of the company and limited to those who own land with a certain level of productive potential" (2001: 1088).

Finally, a fifth feature of the process analyzed is the development of the capacity of major national companies to autonomously generate advanced technology and services. In the case of Bimbo, one of the group's organizations supplies the machinery, equipment and services that the rest require. In fact, in 1986, Bimbo built third-generation factories and by 1993, management was already thinking about building fourth-generation factories with cutting edge technology (Chauvet and González, 2001). Meanwhile, FEMSA has a department dedicated to strategic inputs, business processes and information technology that offers refrigeration, distribution and information system solutions to the rest of its business units (Coca-Cola FEMSA, 2009). Gruma, the conglomerate that recently opted to specialize in corn flour, has a company (INTASA) with two subsidiaries (Tecnomaíz S.A. and Constructora Industrial Agropecuaria S.A. de C.V.) exclusively dedicated to developing its technology operations, which has resulted in the filing of 54 patents in the U.S. between 1968 and 2006 (Rendón and Morales, 2008).

In brief, nearly all dynamic activities of the Mexican food, beverage and tobacco industry display a trend towards productive concentration in a small number of companies that set the market prices. It is useful to remember that the sales of only 30 major companies in the sector went from accounting for 2.8% of the gross domestic product (GDP) in 1994 to 6.3% in 2008 (in 2001, the percentage was 4.8%).⁴ These conglomerates have grown through associations in which relationships of kinship or affinity play an important role, which is the direct result of the fact that State protection for a privileged national and foreign elite grew in the period known as import substitution industrialization. Groups have recently been diversifying their activities as a way to grow while still under centralized control. They are gambling on technology development but have not fortified the development of domestic productive articulation that would multiply the positive effects of their activities on national employment and social welfare. This balance reveals the heterogeneous structural evolution of the sector, the topic of the next section.

THE EVOLUTION OF THE STRUCTURE AND PRODUCTIVITY OF THE SECTOR 1994-2008

Aiming to evaluate the implications of corporate concentration for the structure and efficiency of the food, beverage and tobacco industry in Mexico, a database was built to estimate, at constant prices from December 2003, the monthly values of labor productivity for every year between 1994 and 2008, for 12 branches and 38 classes of activity in the sector. The indicator was determined by dividing total gross production by the man-hours worked in each group considered and was deflated by the National Producer Price Index (NPPI) of the manufacturing sector calculated by Banco de México (Banxico). Because it was necessary to obtain long data series consistent over time that could account for possible transformations associated with processes of structural change, the only viable source of data was the Monthly Survey of Industry (EIM) conducted by the National Statistics and Geography Institute (INEGI) in the Mexican Classification of Activities and Products (CMAP).⁵ By contrast, the procurement of statistical results at the most disaggregated level possible, which did not exist due to the lack of official sources of information that were both long and consistent, would permit the study of intra-sector heterogeneity as highlighted by some authors (Kupfer and Rocha, 2005).

Looking at the results, based on the aforementioned source, it was determined that the food, beverage and tobacco industry is one of the most important in Mexican manufacturing, representing 25.9% of total production and 30.2% of total hours worked in 2008. Although similar to percentages for the sector in 1994 (27.8% and 26.6%, respectively), they indicate an increase in the share of this industry in creating jobs and a decrease in its contribution to production value. The latter can be explained, on the one hand, by the reduction or stagnation of manufacturing levels for a series of activities such as, for example, coffee processing or alcoholic beverages distilled from sugar cane or grapes, and, on the other, the expansion of leading export branches into specialized areas (automobile industry), as well as those whose goods have seen constant increases in international prices (basic metal industry).

In this environment, the growth of activities such as dairy product manufacturing, industrial bakery and bread products and beer and soft drinks, through the consolidation of both nationally and foreign-owned major corporations with a variety of strategies in the internal market, is notable (Lala, Bimbo, Grupo Modeo, FEMSA, etc.). In the beverage area, progress made in organizational and productive processes have increased production levels and reduced the number of man-hours required. In beer production, the production value in constant terms rose by 25.4% from 1994 to 2008, while this figure was 31.7% for soft drinks. Even so, the total number of man-hours worked fell by 28.7% (13,560 hours) and 13.6% (27,769 hours) respectively. This explains why the share of these two major activities in job creation in the sector went from 5.5% to 3.8% and from 23.1% to 19.7%, according to our estimates (see Table 2).

Contrarily, the share of the dairy products and baked goods branches in the manufacturing value of the sector rose, and simultaneously, their share of use of labor in the same period increased, which might suggest that the major companies in these areas grew their market shares without significantly increasing efficiency, confirming what Hendrickson, Wilkinson et al. (2008) pointed out with regards to the role of economic power as the principal factor determining the survival and growth of companies in the sector.

Another clear example of the involution of the pattern of manufacturing specialization in terms of the content of added value of work carried out is the meat industry. Due to growing sales of fresh meat, and slaughter of livestock and poultry, production in constant pesos rose 43.6% from 1994 to 2008, while activities related to processing (freezing and packaging of fresh meat and preparation of sausages and preserved meat) fell 4.6%. It is notable that in preparation of sausages and preserved meat, manufacturing levels fell despite the fact that the number of man-hours worked increased 110.7% in the same time period.

In terms of labor productivity, the food, beverages and tobacco industry saw mediocre performance, with an average of 2.1% annual growth in the time period studied. Despite the continuous modernization of the three groups, which translated into significant increases in the indicator for activities such as beer production, soft drink production and production of other non-alcoholic drinks, as well as in indicators related to the tobacco industry, in 13 of the 38 classes included in the database for the sector, productivity fell between 1994 and 2008. This decrease is especially curious in the dairy product manufacturing and milk treatment and packaging branch, considering this activity has extremely high levels of corporate concentration (see Table 3).

The differences in the productive behavior of the various activities are in many cases linked to the competitiveness of companies, while in others, discrepancies in efficiency are part of a range of corporate growth strategies in the context of the organizational peculiarities of major Mexican business groups. In general, the low articulation between major companies and national suppliers and their dependence on importing raw materials has made the sector more heterogeneous. This is also shown by the evolution of traditional dispersion indicators applied to productivity and to the 12 branches and 38 classes considered.

Figures 1 and 2 show a consistent upward trend for the standard deviation and coefficient of variation for production per man-hour worked starting in 2000, which translates into a progressive widening of technology gaps between lagging and modernized groups in the most recent time period. This continuous rise in the values of dispersion indicators also shows a change in the trend of the series, as from 1996 to 2000, productivity levels in the sector began to converge. Likewise, the fact that the data calculated at the level of classes of activity are higher than the data obtained by branch reveals the importance of examining the topic at the greatest degree of disaggregation possible.

TECHNICAL PROGRESS AND STRUCTURAL CHANGES

In response to the hypothesis that in the time period 1994-2008 increased concentration, modernization and diversification among Mexican corporate groups was correlated with regressive structural change, understood as a negative contribution to productive efficiency of the intra-sector displacement of the labor factor, the calculations conducted using our database of information and a technique commonly known in its generic form as shift-share, returned significant results. The exercise allowed us to decompose increases in productivity (total effect) between two moments of time into two terms, one associated with technological changes within each activity (intrinsic effect) and the other associated with structural changes as previously defined here (structural effect).

The mathematic formula for this decomposition that was applied to compare the values of the indicator in 38 classes at three moments in time (1994, 2001, 2008) was as follows:

(1)

Where is the productivity of activity i ( i= 1, 2,...n) at moment t = 0, T and is the share of activity i ( i= 1, 2,...n) in the total active employed population in the sector at t = 0, T. The first term on the right of the equation represents the variation in labor productivity due to changes in the intrinsic productivity of the n classes of activity (intrinsic effect). The second term indicates the contribution of the recomposition of the labor force (structural effect) (CEPAL, 2007).⁶

The findings show that in the time period 1994-2008, the growth in production per man-hour worked was 69.87 pesos at December 2003 values for the entire sector, which translates into poor average annual performance of 2.14%. If we divide this period into two time lapses of the same duration (1994-2001) and (2001-2008), it turns out that the increase in productivity was doubled in the second sub-period (46.61 vs. 23.26 pesos in the same constant terms). In that sense, it appears that the trend mentioned in the previous section, regarding the widening of technological gaps and heterogeneous growth within the sector, goes hand in hand with greater productive efficiency. One hypothesis to confirm would therefore be the idea that in the context of the evolution of the current sector specialization pattern, technical progress implies a break with existing productive articulations. The fact that the share of the consumer spending of households and private non-profit institutions in the imported goods market in the overall sector rose from 5.8% in 1994 to 9.3% in 2008⁷ seems to point in that direction.

Another important result is that the only source of progress in productive efficiency at the overall sector level is the so-called intrinsic effect associated with technical and/or organizational improvements in each activity (increased productivity within each class). Therefore the contribution to performance of the indicator on the shift of workers towards more productive uses (structural effect) is on the contrary negative throughout the entire period analyzed. In the time period 2001-2008, the value of the structural effect (-27.69 pesos from December 2003) represents, even in absolute terms, 59.4% of the total increase in sector productivity, meaning that the relocation of labor has involved a shift towards activities with a lower degree of modernization and has recently significantly restrained the evolution of the indicator (see Figure 3).

In this regard, progress made in productive efficiency, the widening of technology gaps between various activities and the evidence of regressive structural change with respect to the use of labor in the sector, are all associated with the corporate concentration described in the second section of this work. If we look at the share of various branches and classes of activity in the growth of productivity for the time period 1994-2008, it emerges that 3 of the 12 branches (manufacturing of dairy products, bread products and the beverage industry) explain 80.5% of the total increase. At the activity level, the fact that modernization was concentrated in few companies translated into a situation in which only 3 of the 38 classes in the database (production of soft drinks and other non-alcoholic beverages, treatment and packaging of milk and industrial bakery and bread products) account for 60.1% of the increase in the indicator, and adding up the top 7 accounts for 100% of total productivity growth (see Table 4).

Less clear is the relationship between the process of productive concentration and regressive structural change, because the analysis of the determinants of the evolution of productivity produced heterogeneous situations. In the beverage industry, the structural and intrinsic effects both returned high values, but while the structural component was negative, the intrinsic effect was positive, where the loss of efficiency is related to the strong relocation of the labor factor (equivalent to 63.9% of the productivity increase due to the intrinsic effect). On the contrary, in the dairy product manufacturing and bread branch, both effects (structural and intrinsic) contributed positively to the increase in productivity, highlighting a greater contribution of the displacement of workers than the contribution of technical and organizational progress. At a more disaggregated level, the determinants of variations in productivity of the classes coincide with what was observed for the branches to which each activity belongs. One interesting case was milk treatment and packaging, a pillar of the dairy product manufacturing branch, where the contribution of technical progress and the advance in productivity was null, and even slightly negative between 1994 and 2008, and where the displacement of labor explains the entirety of the improvement in the indicator (see Table 4).

Even so, the study of how productivity and its determinants evolved by sub-period revealed an evident association between modernization and regressive structural change. In fact, the improved performance in terms of efficiency in the sector in 2001-2008 can be explained in part by increasing productivity due to enhanced techniques in activities that did not contribute to the growth of the coefficient in the previous sub-period (1994-2001) and where the structural effect was null or negative throughout the entire period analyzed (1994-2008) (production of edible vegetable oils and fats, wheat milling and cigarette manufacturing). It turns out then that the recent growth of productivity in these activities has not translated into the absorption of the additional quantities of labor contained therein (see Table 5).

In that sense, the reorganization of productive processes in the beverage industry and, concretely, in activities related to beer production and the production of soft drinks and other non-alcoholic beverages is more than indicative of the evolution of the sector. This type of modernization is relegating labor to less efficient uses in a context of stagnated productivity in the majority of the classes studied as a result of authentic deindustrialization in lagging activities. One piece of data that was especially revealing in the period 2001-2008 was that the increase in productivity was less than one peso at December 2003 values in 23 of the 38 activity classes in the sector.

In summary, corporate expansion and its particular features in the food, beverage and tobacco industry in Mexico have led to an increasingly inefficient use of the labor factor, which means that the current specialization model will not be able to create the jobs needed in leading sector activities. As a result, there is evidence of structural change, but this transformation is regressive insofar as it has occurred to the detriment of the efficient allocation of productive factors and in opposition to what was expected by the theoretical suppositions that maintain the advantages of trade openness and economic liberalization.

CONCLUSIONS

Unlike on the international stage, where corporate concentration in the agri-food sector has occurred through the vertical integration of agroindustrial complexes that manage the value chain by controlling the exploitation of raw materials, in Mexico, corporate expansion has recently been growing through the diversification of activities and without the full availability of its own natural resources. One reason for the sui generis nature of the process in Mexico is found in the very background of the national groups, which were formed with State protection and consolidated through alliances driven by kinship or affinity.

In that sense, the impact of the strengthening of these groups based on efficiency, degree of articulation and sector structure varies as a function of the various corporate strategies in place. While in milk treatment and packaging, the gamble on quality products and the exercise of market power have permitted corporate expansion and job creation, in other industries, such as the beverage industry, modernization has pushed labor out.

In summary, the principle findings of this work are:

1. In an environment of indiscriminate openness, the productive specialization pattern of the sector has built up an increasingly heterogeneous manufacturing structure in which technical progress primarily implies the weakening of local productive articulation and secondarily a regressive structural change in which the labor factor is shifted towards less productive uses.
2. As a result, the modernization of these large business groups that are poorly linked to local suppliers has led to an increase in efficiency only in the branches related to, fundamentally, dairy product production, bread products and the beverage industry.
3. Simultaneously, widespread deindustrialization has accelerated in the sector, in which 75% of activities considered in this work showed stagnation or regression in labor productivity in the period 1994-2008.

Finally, both in this situation of low competitiveness, as well as in other cases, the unavailability of raw materials is a limitation on the growth and globalization of these Mexican companies. From the perspective of national development, the recent structural evolution of the food, beverage and tobacco industry, in turn, rules out real alternatives for productive development and deepens dependence on the import of commodities. This involution towards a pattern of limited industrial specialization to the exclusive benefit of a few major corporate groups, both foreign and national, is one of the consequences of the State withdrawing from the productive sphere and illuminates the loss of sovereignty in strategic realms.

In this context, an alternative proposal to restructure the sector, whose main objective would be to foster economic growth with better income distribution, will only find success as part of a comprehensive development strategy that begins by reforming the State and its institutions, giving them the means necessary to effectively intervene in the economy. A project of such magnitude would involve rethinking not only the need for greater state intervention, how to implement targeted policy measures for the sector and the articulation of leading companies with domestic suppliers but also, and especially, the very purpose of government itself.

As an example, in certain cases, the formation of local manufacturing chains may require a shift away from the current logic of competition, which essentially depends on insertion in global value chains, but it would also relocate factors towards more productive uses. Similarly, the evidence points to the fact that innovation and technological change do not alone generate sustainable economic development, and can even, in certain historical conditions, lead to regressive evolution. In summary, the major change resides in the fact that productive choices obey certain criteria of social efficiency, which is only viable if the public is at the heart of decision-making.

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