Katherine Finnegan is a second-year Master's student at SAIS, concentrating in Latin American Studies. She spent the past summer working with the state government in Oaxaca, Mexico.

The rising popularity of mezcal is no surprise. It is a high-quality, artisanal, organic, small-batch spirit seeking not to follow in the footsteps of its mass-produced cousin, tequila. While both tequila and mezcal are distilled from the agave plant, tequila is only produced from blue agave, while mezcal is made from over 30 varieties of the plant, providing a wider variety of tastes. Once known as the moonshine of the pueblo, you can now find mezcal on high-end cocktail menus and mezcalerias dotting every major city in the U.S. The boom is obvious: mezcal exports have increased over 200 percent in the past five years, growing from just below 650,000 liters in 2011 to over 2 million liters in 2016. What remains doubtful now is what kind of economic development this popular new Mexican export can bring to one of the country’s poorest states.

I explored that question this summer as an intern with the state government of Oaxaca. Though mezcal can be produced in nine Mexican states, just about 90 percent of certified mezcal is produced in Oaxaca. Interviewing and working with government ministries, civil associations, academics, and the producers themselves, I left with many more questions than answers. The mezcal industry is a fascinating case study for the complexity of development, with issues crossing property rights and designation of origin, land reform, sustainable farming, education, indigenous marginalization, immigration, and of course, where the value actually lands in value chain development. However, in order to leverage the rise of mezcal for local economic growth and develop a stable industry, Oaxaca must confront these two challenges:

1. Marginalization of producers

The most recent study produced by the University of Chapingo and the European Union found that 94 percent of mezcal producers live in areas of high or very high marginalization. Furthermore, over 70 percent of producers surveyed had no education or only up to the primary level. The physical marginality makes access to certification, bottling, and markets difficult. Low levels of human capital development mean small producers often fall prey to middlemen and exploitative investors, absorb the costs and fall out of business when agave prices rise, or are never able to break out of seasonal production sold to neighbors and friends. Only 12 percent of mezcal producers bottle their own drink and only 11 percent commercialize. The majority of mezcal producers only participate at the bottom of the supply chain, gaining little value for their production. 

2. Production challenges

The agave plant, or maguey as it is called in Oaxaca, has a very long maturation period. The most productive plant, Espadin, takes between six and eight years to mature. Wild varieties can take upwards of 20 to 25 years to be ready to turn into mezcal. Maguey production is profitable at a scale of five or more hectares; however, 84 percent of producers have smaller plots. Furthermore, the majority of land plots are communal or ejidal, restricting farmers’ access to credit. While higher demand for maguey has increased prices from 1 or 2 pesos a kilo to upwards of six, a lack of incentive (no one wants to wait 20 years to see a return) and ability to produce at scale has led to a shortage of mature agave. Plots of new Espadin scatter the Oaxacan valley, though the increased demand has also led to asexual reproduction and subsequent plantations of clones incredibly susceptible to disease.

Ultimately, it is tough to plan and invest in an industry where information is lacking. There is currently no official registry of maguey plants and an incomplete registry of mezcal producers. The national regulating organization certified 624 producers in 2016; however, studies estimate that less than 20 percent of total mezcal production in the state is certified. Because of this, it is difficult to understand current supply and demand for maguey. Many of the larger, exporting mezcal companies have begun to buy and plant their own plots of agave, controlling the entirety of the supply chain. Unfortunately, the small producers of both maguey and mezcal lose the most in a volatile primary-product-based industry.

The mezcal boom is being portrayed as an opportunity to support small producers in Oaxaca and even reverse migration, but the reality is much more complex. Developing the industry in a way that truly advances the most marginalized, small-batch producers will be difficult. With intentional public policy by the government and concerted organization by associations and cooperatives of small producers, perhaps the industry can continue to meet growing international demand while preserving the artisanal production of the drink.

PHOTO CREDIT: "Carmaglover" by Carmaglover 2014, from Flickr Creative Commons licensed under CC BY 2.0.

Below, the author with colleagues in Mexico.