Guacamole Wars.

California growers fought U.S. imports of Mexican avocados. Now the same growers are fighting for Mexican turf.

PAST THE COMMERCIAL STRIP AND toward the highway north in this small town in the western state of Michoacan, shiny tractor-trailers sit waiting to haul plump avocados to supermarkets in the United States, Asia and Europe. But the exporters are not Mexicans, who've fought for years to enter the U.S. market, but well-financed Californians.

An odd trade irony has cropped up in the world's most abundant avocado groves. U.S. firms, which for eight decades lobbied their leaders to bar Mexican avocados from U.S. turf, have moved in and are trouncing their Mexican brethren in exports of the yellow-green fruit.

California avocado giants have built some of the region's best-equipped packing plants, established ties to local growers and seized U.S. market share from Mexican competitors. Meanwhile, the Mexican players face tough financial constraints, and a host of sanitary hurdles. And all Mexican produce com-fronts strict, California-grower-backed limited entry into only a portion of the United States during a four-month period every year. No wonder the Mexicans accuse U.S. authorities of two-faced tactics.

The Californians "have played a double-sided game," gripes Ricardo Javier Vega, president of the Uruapan-based Association of Mexican Avocado Exporters and Packers (Aseeam). "They have scared Americans with stories of monstrous creatures supposedly living inside Mexican avocados. Then they come down here and ship Mexican avocados around the world, including to the U.S. It's nonsense."

Two years ago, Mexico partially won the 83-year-old avocado trade dispute with the United States. Only the Haas variety grown in four zones in the western state of Michoacan can enter 19 U.S. northern and mid-Atlantic states between November and February. Exporting companies must pay authorities from both countries to inspect produce regularly. Among other criteria, plants must ring packing premises with floor-to-ceiling netting to keep out bugs.

Illegal Mexican avocados. Rule breakers are duly punished: Last fall, Wal-Mart Stores reportedly agreed to pay a US$45,000 fine to settle allegations by the U.S. government that it illegally shipped Mexican avocados. Wal-Mart claimed it believed the produce came from countries other than Mexico.

Mexico is still vying for wider entry into the U.S.--if not to all 50 states, at least to those with no avocado production (California and Florida are the only U.S. growers). "The last two import seasons have proven that Mexican avocados do not introduce pests," says Xavier Equihua, vice president of Washington, D.C.-based firm Federal Strategies, which has lobbied U.S. lawmakers on behalf of Mexico avocado interests. "The science is there to support expanding the U.S. market."

Equihua thinks the California growers are playing both sides of the fence. "On the one hand, they say Mexican avocados will infect their produce; on the other hand, they're very aggressive at marketing Mexican avocados," he says.

Calavo, a Santa Ana, California-based plant that claims a 55% market share of the U.S. avocado market, insists it is merely protecting the interests of growers back home. Gerry Watts, Calavo's vice president of operations, says the move south of the border is purely a business issue. "We saw that the plant would be a profitable venture for our shareholders [without] threatening our growers' livelihood," he says. "We weren't going to lose market share."

Asked if he believed increased U.S. market access should be granted, he responds, "I won't comment on that. It's a very political issue and I work for 1,600 growers. That should be enough comment." Other California companies operating in Michoacan include Fresh Directions, West Pac Avocado and Mission.

Puebla and Veracruz states also cultivate the fruit, but Michoacan is Mexico's biggest producer, as a drive through miles of green swathes of avocado trees persuades. The four U.S.-approved towns radiate from Uruapan, which means "a place where flowers are plentiful" in the native Purepecha language. It is now a traffic-choked town that calls itself the world's avocado capital. Planted along cul-de-sacs, groves are framed by lush, fedora-shaped mountains where scarves of clouds hang low.

Big avocado eaters. Mexico produces 68% of the world's avocados. Banned north of the border for most of this century, Mexico's avocados were mostly sold domestically--the world's most prolific producer is also the world's biggest avocado-eating market, consuming an annual per capita average of 8.5 kilos. After the peso's 1994 collapse, Mexico's producers shopped abroad for new customers with hard currency stability Japan and France became enthusiasts for Mexican avocados.

The industry's future, though, may lie in the United States. In the 1997-1998 season, Mexican producers exported to the United States some $14 million worth--a mere fraction of total U.S. avocado sales of $277.4 million, Still, Mexican growers and exporters sparkle when chatting about a possible deeper reach into the market. Industry sources expect a roughly 30% increase over the 1998-1999 season, when exports totaled 9,768 tons. "The U.S. market is about to explode," Aseeam's Vega says. Still off-limits are regions vastly populated with Mexicans and Mexican-Americans, including the southwestern states of Arizona, California and Texas.

How would Mexican-owned companies fare in the future if the United States opens the market further? Not well, if the recent past is any guide. Last year, not a single Mexican-owned company ranked among the top three exporters to the United States. Mexico avocado stalwart San Lorenzo, which ranked third in the 1997-1998 export season to the United States, has fallen to 12th place. Jose Obelleiro Carbajal, general manager of San Lorenzo's packing plant, appears sanguine about the Californians' snagging of his company's market share.

"The U.S. market is still a very young one for Mexico," Carbajal says. "I have plenty of faith San Lorenzo can compete with the best in the world."

Top U.S. exporter Calavo built its Uruapan packing plant in six months and opened for business in August 1998, shipping across the globe, including Canada, France and Hong Kong. By the end of the 1998-1999 season, they trucked 1.965 million kilos of avocados to the United States, more than all others.

Calavo soared to the top of the charts because of market know-how, says Dionisio Ortiz, a Mexican manager of Calavo de Mexico. "Calavo is very methodical and organized," he says. "They don't do things because they think it can do well. They do the numbers and do something because it will do well." One by one. Lack of financing is a distinct disadvantage to Mexican producers, according to Prisciliano Jimenez Rosales, treasurer of Aseeam and member of the 45-year-old avocado growers' cooperative Cupanda, which shares profits and farm equipment among its 340 members. Double-digit interest rates make loans a gamble--even if a producer could find a domestic bank willing to make loans. Many Mexican firms have gone at least five years without investing in equipment or infrastructure.

A tour of some packing plants suggests capital difficulties. At Cupanda, for instance, a worker picks labels one by one, then sticks them on avocados packed neatly in a box bound for France. A few feet away, workers hand-sort through crates of fruit, separating unblemished, exportable avocados from those with nicks on their tough skin (the blemished ones stay in-country). A couple of old-model trucks are parked in front of the plant's loading dock. At Mission's plant, however, Caterpillar machinery whizzes around the plant floor and large rotating brushes sweep avocados clean of leaf debris.

Lack of financing explains some of the woes Mexican avocado exporters face--but not all. Cupanda's Jimenez and others fault Mexican producers for not sharpening their commercial strategy. "They must become more professional and organized in the entire chain of selling, from production to distribution," says Gustavo Larragoiti Flores, who heads Normex, a non-profit organization charged with maintaining a "culture of quality" and strict standards among Mexican producers. Normex tracks weekly shipment export volumes to the United States--information Mexican exporters could exploit to assess the appetite for their products. "But they don't call us," he says.

The high number of exporters gunning for the U.S. market is undermining prices, Larragoiti says. Last year, at least 14 different exporters shipped to the United States. "That's too many," he says, adding that they drove prices so low it cut profitability. He and others want to limit the number to a maximum of 10 exporters, pointing to Chile's concentrated number of exporters as a successful case study in the U.S. market. "How can it be that Chile is beating us?" Jimenez says.

Dave Culpepper, import and export director of West Pac Avocado, knows how. "The Chileans are a lot more organized--they're very professional and don't have problems with money," he says. "They're very? Solvent." Chileans also have the advantage of complete market access; U.S. officials don't impose geographical or seasonal limits on Chilean avocados.

Mexico's highly fragmented industry is another culprit--there are more than 10,000 avocado producers, dozens of packing plants and no strong distribution link. Also to blame is a short-term market psychology. "The way Mexicans conceive of the market is, 'We'll make a killing today,"' Ortiz says. Unless the Mexicans start looking ahead, the big California growers may be the ones to "make a killing" and it may be in Mexico.