1. Mexico's PROCAMPO program was introduced to compensate farmers for crop price reductions associated with the North American Free Trade Agreement (NAFTA), and to support farmers as they transitioned away from producing the affected crops into new economic activities. Farmers were eligible if they cultivated one of nine qualifying crops in the three years just prior to NAFTA. Farmers received payments equal to about $70 per hectare of qualifying land (i.e. land on which qualifying crops had been grown in 1991-1993). The program was implemented by program staff located in government offices in major market towns and was publicized on radio and TV. At the beginning of each planting season eligible farmers could claim payments at program offices, as long as they continued to cultivate any crops (not just the crops affected by NAFTA) on their qualifying land. To put this another way, farmers could not continue to collect benefits if their qualifying land was idle, and no one could collect benefits if the land had been sold or given to new owners. The program was originally designed to make these payments at the initial levels for 10 years, and then to reduce the per-hectare payments down to zero over a five-year phase-out period.

1. What are PROCAMPO's eligibility requirements?
2. What are PROCAMPO's behavioral conditions?
3. Why do you think eligibility is tied to historical cultivation of NAFTA crops rather than
4. to current cultivation of those crops?
5. Given what you know about the program's design, what concerns do you have about
6. potential targeting failures?

2)Suppose the household receive rice 70 percent of their income from producing rice and spends 30 percent of its total consumption expenditure on rice. If the price of rice rises by 20 percent, calculate:

Net rice sales as fraction of total consumption expenditure?

Percentage effect on real purchasing power?

3)Suppose the household earns 40% of their income by selling a cash crop, spends nothing on inputs, and consumes none of the cash crop. Rest of the 60% of their income received by selling their family labor. If the price of the cash crop rises by 20 percent and wage rate increases by 15%, calculate:

Net rice sales as fraction of total consumption expenditure?

Percentage effect on real purchasing power?