IMPACT OF AGRICULTURAL FINANCING ON AGRICULTURAL GROSS DOMESTIC PRODUCT IN MEXICO

The development of the primary sector requires investment capital, which is related to access to credit. However, the demand for formal credit in Mexico has declined. This research aimed to analyze the behavior and impact of agricultural credit on the agricultural Gross Domestic Product (GDP) from 1993 to 2022. A translogarithmic cost function was employed, considering factors such as labor, fertilizers by nutrient, and bank credit balances allocated to the primary sector. Decadal Allen-Uzawa price elasticities of substitution and own price elasticities were calculated. Considering technical change as a time trend, a decline in formal credit granted to the primary sector over time and an increase in labor force participation were observed. Furthermore, a positive relationship was found between the demand for formal credit and GDP, indicating that credit provided by banks contributes to the sector’s growth. According to elasticity estimates, credit and labor went from being substitutes between 1993 and 2002 to complements between 2003 and 2022, indicating two main effects: the change in Mexico's productive structure and the structural banking reform. Fertilizers were complementary factors for commercial banks and substitutes for development banks. The price elasticities of all factors, except for the potassium elasticity, were inelastic. In conclusion, the current situation shows a decrease in formal credit over time but a positive effect between credit and primary GDP, so the differences in efficiency in the Mexican primary sector are functionally related to non-neutral scale effects and technological change. Key words: agricultural credit, translog, duality, Allen-Uzawa elasticities.