INTRODUCTION

The coastal region of Hermosillo in Sonora, together with several agricultural districts in Sinaloa, underwent a process of productive and organizational transformation beginning in the 1990s, within the broader context of the implementation of the North American Free Trade Agreement (NAFTA) among Mexico, the United States, and Canada in 1994. The ensuing trade liberalization intensified the specialization of horticultural production, necessitating higher levels of technological sophistication and promoting the expansion and diversification of consumer markets. As ^{Rubio (1994)} observes, grain and cereal cultivation was supplanted by a new cropping pattern aligned with the global reorganization of agriculture, characterized by a pronounced increase in international trade between emerging and developed economies.

^{Wong and Salido (1992)} characterize this phenomenon as the emergence of a model rooted in export-oriented agroindustry, particularly focused on the production of fruits and vegetables. The northwestern region of Mexico, in particular, leveraged its comparative advantages to capitalize on the opportunities generated by the country’s aggressive trade liberalization during this period. This region adapted effectively to the new agricultural policy, notably through the reduction or elimination of subsidies, the removal of guaranteed prices, and the determination of crop prices based on quotations from the Chicago and New York exchanges, as well as through the promotion of technological innovation and private investment.

In this manner, the agroindustry consolidated an organizational framework consistent with the flexible production systems characteristic of post-Fordism. In the context of agriculture, some authors have identified this framework as agromaquila (^{Gómez Cruz & Caraveo López, 1990}; ^{Wong and Salido, 1992}; ^{Sandoval et al., 1996}), drawing an analogy with the maquiladora model and its geographically divided production processes, labor-intensive activities being located in Mexico, while knowledge-, design-, or trade-intensive tasks were carried out in the United States. This organizational modality, previously typical of the manufacturing sector, was initially replicated within the domain of export-oriented agriculture.

The primary comparative advantage of the agromaquila lay in its access to low-wage labor. However, from a global value chain (GVC) perspective, farmers did not develop competitive advantages in technology or infrastructure, as they occupied the lowest tier of the chain (^{Macías, 2003}). Similarly, ^{Rubio (2001)} and ^{Marañón (1997)} emphasize that most Mexican producers held a subordinate position relative to multinational corporations, a dynamic that translated into limited benefits for regional development.

Despite the foregoing, an interesting trend has emerged over time: some fruit and vegetable producers in northwestern Mexico have gradually repositioned themselves within the global value chain, assuming the role of marketers of their own production. This is particularly evident among horticulturists in the coastal region of Hermosillo and in select agricultural districts of Sinaloa, who constitute the focus of the present study.

^{Pavlakovich-Kochi and Thompson (2013)} highlight this phenomenon, which has fostered the consolidation of a cross-border cluster linking vegetable producers in Sonora and Sinaloa with storage, distribution, and transportation firms in the border state of Arizona, United States. Upon crossing the border, the fruits and vegetables are received by produce companies, specialized firms engaged in the storage, importation, and marketing of these products. This process stimulates the integration of additional economic activities, such as customs services, transportation, and sales brokerage. To underscore the economic significance of these firms, it is notable that during the first half of the 2010s, “approximately 120,000 trucks carrying fresh Mexican produce crossed the border, with an estimated value of 2.5 billion dollars” (^{Pavlakovich-Kochi & Thompson, 2014, p. 1}). Currently, around 70% of the slightly more than 100 produce companies in the study area are wholly or partially owned by Mexican farmers.

To analyze this phenomenon, the specialized literature was reviewed. Among the most influential contributions is the work of Gereffi and colleagues, who examined the structure of agricultural global value chains (GVCs) across various countries (^{Dolan et al., 1999}; ^{Lee et al., 2012}; ^{Duval et al., 2018}; ^{Scheitrum, 2022}; ^{Soliman et al., 2023}).⁴ This GVC approach was extensively applied in the studies by ^{Dolan and Humphrey (2000)}, which explored how Kenyan vegetable exporters to the United Kingdom expanded their functions and capabilities within the chain. While British importers concentrated on global logistics and supply chain management, the exporters focused on production and product diversification, increasing their output from a limited number of vegetable varieties to as many as 80 distinct products.

^{Barrientos and Visser (2012)}, in turn, analyzed the functioning of horticultural value chains in South Africa, following a marked increase in exports of horticultural products to European markets. The authors found that South African producers significantly enhanced their production processes and product quality to comply with stringent European standards. In other words, Barrientos and Visser documented a process of functional and product upgrading among horticulturists in the region.

Regarding the study region, evidence on upgrading among agricultural producers in northwestern Mexico, particularly in the coastal region of Hermosillo, remains limited. ^{Villa and Bracamonte (2013)} examined how global production networks contributed to the modernization of agriculture in northwestern Mexico, focusing on the coastal region of Hermosillo and the southern part of Baja California Sur. In both regions, producers faced significant environmental challenges, such as aquifer depletion and contamination, while simultaneously striving to achieve highly competitive standards in the production of both conventional and organic fruits and vegetables, and to satisfy national and international demand, primarily from the United States and, to a lesser extent, from the European Union, Canada, and Japan.

^{Villa and Bracamonte (2013)}, following the perspective of ^{López Placencia and Gomis (2004)}, argue that upgrading emerges as a necessity for agricultural producers to adapt to conditions primarily dictated by buyers within global value chains, a challenge addressed through learning processes and the adoption of new technologies. In their study, the authors employ three analytical categories to assess upgrading: product, process, and organizational. Their results indicate that both agricultural regions made progress in terms of product, process, and organizational competitiveness, exhibiting both shared trends and notable differences.

With respect to competitive product upgrading, the authors note that producers shifted away from traditional cropping patterns to concentrate on the intensive and highly technologized production of fruits and vegetables, primarily targeting international markets. In terms of process upgrading, while similarities were observed in certain activities, such as improvements in international certifications, substantial differences emerged in the adoption of new technologies. Finally, convergence was evident in the upgrading of organizational functions, including managerial competencies, logistics and marketing strategies, and the incorporation of new technologies (^{López Placencia & Gomis, 2004}).

In a study conducted by ^{González (2015)}, the value chain of the wine industry in Baja California was analyzed, revealing two types of challenges: internal, related to technological, economic, marketing, and distribution capacities; and external, including environmental issues such as aquifer overexploitation and salinization, the scarcity of local suppliers, and the absence of governmental support schemes for company financing. In other instances, the literature addresses global value chains only for specific products—such as tomatoes and cucumbers from Sinaloa exported to the United States—emphasizing the economic benefits of marketing these commodities but without examining issues such as upgrading (^{Duval et al., 2018}; ^{Scheitrum, 2022}).

The review of the literature on upgrading in agricultural value chains highlights a research problem encompassing two main dimensions. First, upgrading is an increasingly relevant issue in emerging economies such as Mexico, as it theoretically allows key companies or economic agents, in this case, fruit and vegetable producers, to expand into other activities or segments of global value chains (GVCs) linked to developed countries. Second, upgrading involves a continuous process of learning, adaptation, and modernization within GVCs, facilitating integration into global production networks (^{Villa & Bracamonte, 2013}). In this context, it is essential to examine the strategies implemented by Mexican-owned produce companies to adapt and progress across the various segments that constitute and integrate the global chain of fruit and vegetable production and marketing.

It is important to note, as previously mentioned, that the specialized literature has addressed this topic predominantly within the manufacturing sector. The possibility of an upgrading process entails recognizing that the historical inertia, where producers in peripheral regions remain confined to marginal stages of the value chain, particularly those that are labor-intensive and characterized by limited or no governance capacity within global chain structures, can indeed be overcome, as discussed by ^{Gómez Cruz and Caraveo López (1990)}, ^{Wong and Salido (1992), Sandoval et al. (1996)}, ^{Borbón (2001)}, and ^{Sandoval Cabrera (2012)}. Nevertheless, a significant knowledge gap persists regarding how Mexican producers have succeeded in moving upward within global value chains. This gap underscores the need to examine the specific dynamics through which certain fruit and vegetable producers from Sonora and Sinaloa have transitioned from agromaquila operations to becoming marketers and distributors in the United States.

Building on this background, the objective of this study is to analyze the upgrading of producers in northwestern Mexico within the global value chain of horticultural products, with the aim of identifying the characteristics and dimensions of this process. The knowledge generated constitutes both a theoretical and empirical contribution toward understanding the factors that have enabled some farmers to transition from producers to marketers. The following sections present the theoretical framework relevant to the research problem, describe the methodological strategy employed, and analyze and discuss the principal findings in light of their implications for the study area. The paper concludes with a summary of the main conclusions.

UPGRADING IN GLOBAL VALUE CHAINS

The globalization of production constitutes the prelude to the development of GVCs, as they form part of the broader reorganization of the world economy that unfolded between the late twentieth and early twenty-first centuries. This transformation reshaped the competitive dynamics of nations, firms, and industries, thereby redefining international trade patterns. In this context, ^{Gereffi (1999)} observes that the exponential growth of imports in developed countries reflects a shift in the center of gravity of manufacturing and export activities toward emerging economies. Furthermore, ^{Gereffi (1999)} emphasizes that GVCs, now the principal mechanism of international trade and a complex network of interconnections among firms, countries, and regions, originate from the fragmentation of production into distinct stages distributed across different geographic locations according to their comparative advantages (^{Porter, 1985}). Accordingly, GVCs encompass successive stages that add value to the final product, through technological innovation, design improvements, cost optimization, or quality enhancement, implying the specialization of each participating country or region in strategic segments of the production process (^{Gereffi, 1999}; ^{Flento & Ponte, 2017}; ^{Ponte & Sturgeon, 2017}).

Horticultural GVCs comprise several interconnected segments that progressively add value to the product. The process begins with the selection and purchase of seeds, followed by planting and the application of agricultural practices tailored to the ecological conditions most favorable for specific crops. The harvested produce is then transported to facilities for sorting, cleaning, and packaging, where additional value is incorporated through quality standardization and product presentation. Subsequently, these goods are distributed domestically or internationally via transportation systems designed to preserve freshness and quality, ultimately reaching wholesale and retail markets, or in some cases, the final consumer directly (^{Gereffi & Fernandez-Stark, 2011}). Map 1 illustrates the stages and geographic distribution of the GVC analyzed in this study.

Source: Own elaboration based on interview data.

Map 1. Distribution Lines in the North American Fruit and Vegetable GVC 

As depicted in Map 1, a global value chain has emerged along the Mexican Pacific coast, linking horticultural production regions with marketing and distribution firms (produce companies) located in Río Rico, Arizona (^{Fresh Produce Association of the Americas, 2023}). From this hub, goods are distributed to multiple collection centers across the United States and Canada. For the purposes of this study, the focus is on horticultural producers in Sinaloa and Sonora, northwestern Mexico,⁵ with particular attention to the growers in the coastal region of Hermosillo, Sonora.

Over the last two decades of the twentieth century and continuing into the present, economic integration frameworks driven by globalization have experienced profound transformations, accelerated by the disruptions of supply chains resulting from the COVID-19 pandemic and the trade conflict between China and the United States. These developments have fostered the emergence of new growth hubs grounded in regional comparative advantages, a process that has influenced the evolution of global value chains across multiple economic sectors and productive activities, including agriculture (^{Richey & Ponte, 2021}). This phenomenon is particularly evident in the fruit and vegetable production chain.

In this context, a fundamental assumption of upgrading within GVCs is the central role of the lead firm as the dominant actor in the chain, determining the nature of relationships with other firms, access to international markets and technologies, and the development or enhancement of capabilities (^{Gereffi, 1999}; ^{Humphrey & Schmitz, 2000}; ^{Morrison & Pietrobelli, 2008}; ^{Pietrobelli & Rabelloti, 2011}). In line with this, ^{Gereffi (1999)} underscores governance as a critical factor for understanding the organization and management of the actors involved in GVCs. Building on this idea, ^{Gereffi et al. (2005, pp. 84–85)} proposed a classification of five types of governance, based on three key dimensions: the complexity of transactions, the codification of information, and the capabilities of suppliers. The five governance types they identify are:

Table 1 summarizes the relationship between the five types of governance and the three determinants identified by ^{Gereffi et al. (2005)}. These theoretical assumptions provide a framework for understanding how farmers in northwestern Mexico have enhanced their position within the chain, that is, how they have achieved upgrading. This process occurs when actors engaged in lower value-added activities seek to move into higher-value segments by enhancing technologies, skills, and quality, thereby increasing their competitiveness and participation within the chain (^{Porter, 1985}; ^{Giuliani et al., 2005}; ^{Gereffi & Fernandez-Stark, 2011}).

Table 1. Relationship Between Causal Factors and Types of Governance in GVCs  

Type of governance	Complexity in transactions	Coding skills (transactions)	Supplier capacity	Level of coordination
Market	Low	High	High	Low High
Modular	High	High	High
Relational	High	Low	High
Captive	High	High	Low
Hierarchical	High	Low	Low

Source: ^{Gereffi et al. (2005, p. 87)}.

^{Gereffi (1999)} proposes a classification of four types of upgrading: (i) product upgrading, (ii) process upgrading, (iii) functional upgrading, and (iv) inter-sectoral or inter-chain upgrading (Figure 1). This study focuses primarily on functional upgrading, examining how a group of Mexican horticultural producers moved vertically within the chain by acquiring new and more complex functions related to the marketing and distribution of products, consolidated within the produce industry. Nevertheless, the study also considers the potential for product or process upgrading, acknowledging that these categories are not mutually exclusive and may occur concurrently or in combination within the dynamics of global value chains.

Source: Own elaboration with information from ^{Gereffi and Fernandez-Stark (2011)}.

Figure 1. Upgrade Categories 

In summary, the theoretical framework on upgrading in GVCs suggests that governance structures play a critical role in enabling upgrading among the various agents or firms involved. The different types of governance—hierarchical, market-based, modular, relational, and captive—shape the distribution of resources and capabilities along the chain. For instance, under relational governance, where close, trust-based ties prevail, firms may have greater opportunities to innovate and enhance their processes and products due to the continuous flow of information and collaboration. In contrast, within a captive governance environment, small suppliers are often constrained by the demands of dominant buyers, which can limit their capacity to move into higher-value activities.

Additionally, governance structures can be understood as a form of coordination that does not originate from market exchanges between parties, in which chain leadership, typically exercised by a large buyer or producer, is effective in maintaining control over production in labor or technology intensive industries, but less so in sectors lacking an established lead firm (^{Gereffi & Kaplinsky, 2009}). These strategic sectors have traditionally been managed through vertical governance when led by a large producer, or through buyer-driven governance when a purchaser dominated the chain (^{Kaplinsky & Morris, 2001}). Consequently, the type of governance directly influences the upgrading potential of firms, shaping their growth trajectory and their capacity to achieve greater benefits within the chain.

METHODOLOGICAL STRATEGY

RESULTS

The following section presents the main findings, highlighting the functional upgrading process achieved by Mexican producers in northwestern Mexico within the GVC of fruit and vegetable products.

DISCUSSION

The four sections of the Results chapter illustrate the overall development of the Sonora–Arizona horticultural GVC across its various stages of growth and expansion, evolving from the export of cereals and grains to a diverse array of fruits and vegetables with highly specified qualities, distributed through production networks and supply routes. Throughout this process, producers have played a central role, providing critical information on shifts in consumer preferences in North America, as well as guidance on the technological adjustments necessary to enhance the productivity of horticultural activities in northwestern Mexico. In this context, Figure 2 schematically summarizes the four themes identified as particularly relevant for discussion based on these findings.

Source: Own elaboration based on the results obtained.

Figure 2. The Produces-Producers Relationships Within the Upgrading Process of the Northwestern México Horticultural Global Value Chain 

First, the concept of upgrading is fundamental for understanding how farmers in Sonora and Sinaloa have increased their value-added within the global value chain (GVC), moving beyond the role of mere producers to directly engaging in the marketing of their products in the U.S. market, and, to a lesser extent, in the Asian market, while managing relationships with end customers (^{Gereffi, 1999}). The results also highlight how these farmers have achieved both product and process upgrading, which are crucial for differentiating themselves in a highly competitive market and for meeting the stringent quality and food safety standards required in destinations such as the United States (^{Humphrey & Schmitz, 2002}).

Second, the results reveal a territorial reorganization within the horticultural GVC of producers from the Costa de Hermosillo and, more broadly, northwestern Mexico. Of particular interest is the closer relationship that develops between producers and distributors through a work scheme centered on trust, diverging from conventional critiques of commercial exchange, in which marketing firms typically subordinate suppliers. This trust is grounded in shared identity, reinforced by long-standing business relationships and, in some cases, family ties, which align the interests of both parties in profit-sharing. It is important to note that produce companies earn income from the services they provide to producers, incentivizing them to act in the producers’ best interest. Nonetheless, this does not diminish the significant influence of large buyers, such as supermarket chains, who remain dominant actors in the value chain, dictating quantities, quality standards, and specific packaging requirements, compliance with which is essential to access the point of sale.

Notably, the grower–produce relationship facilitates the incorporation of changes requested by major buyers, promoting early adaptation to evolving food consumption patterns in the North American market. Trust is a critical factor in the development of “regional value chains,” as it enables the exchange of information, knowledge, and skills, contributing to a horticultural sector that not only complies with U.S. regulatory standards but also meets, and in some cases exceeds, the expectations of end consumers.

Third, beyond commercial success and the development of upgrading processes across various dimensions, there is a notable level of interaction between producers and distributors aimed at ensuring that horticulturists adjust and diversify their products. This dynamic reflects the sector’s capacity to adapt to commercial requirements, including phytosanitary measures, environmental challenges such as aquifer overexploitation, ethical labor practices, and, importantly, product pricing. These interactions foster innovation in agricultural operations through the adoption of technologies that enhance productive capacity, while simultaneously enabling producers to diversify both the variety and quality of the crops they bring to market.

Several clear examples illustrate product diversification, as reported by ^{CONAGUA (2024b)}, based on the factors described above. One case is zucchini: at the beginning of the 2000s, the Costa de Hermosillo recorded an annual pumpkin harvest of approximately 32 000 tons, with an average yield of about 16 tons per hectare (ton/ha). In the following decade, pumpkin cultivation was largely replaced by zucchini (or calabacita), with annual production reaching nearly 80 000 tons and an average yield of 32 ton/ha. Another example is cucumber: production began at roughly 2 000 tons in the early 2000s, growing to 20 333 tons by 2016 and 40 018 tons by 2020. A similar trend is observed for watermelon, whose production ranged between 40 000 and 80 000 tons until 2013 and subsequently increased to a total of 367 000 tons by the end of that decade.

It is important to note that, although environmental factors were identified as determinants of adaptive capacity within the produce-producer relationship, a limitation of the present study is that these factors were not addressed as a theoretical reference to be contrasted with the empirical findings. Nonetheless, it is anticipated that environmental issues—particularly the recurring water stress in northwestern Mexico—will play an increasingly significant role in shaping changes to products and processes in the agricultural sector and, consequently, in the governance of the global value chain (GVC). According to ^{Hernández Vásquez (2021)} and ^{CONAGUA (2024a)}, droughts intensified in 1997, 1999, 2000, 2011, 2013, 2017, 2018, 2020, 2021, 2022, and 2023, a trend expected to continue in light of the ongoing impacts of climate change.

In this context, the functional, product, and process upgrading of farmers in northwestern Mexico will increasingly depend on the design and implementation of climate change adaptation and mitigation strategies. Measures such as crop diversification, improvements in irrigation systems, and investment in climate-resilient technologies can not only reduce vulnerability to extreme events but also enhance competitiveness in international markets, where sustainability considerations are becoming increasingly important (^{Ponte, 2019}).

Fourth, although geography has historically favored the study area, due to the characteristic growing seasons of northwestern Mexico and U.S. cargo transport regulations, this advantage is not permanent. The construction of the Mazatlán–Durango highway in 2012, part of Federal Highway 40 extending from Mazatlán to Matamoros at the U.S. border, has enabled producers from Mexico’s southern Pacific horticultural region to use this route, thereby reducing the distance to markets in Texas and Florida. As several interviewees noted, this development has weakened Nogales’ role as a key node in the commercialization of these products.

In this context, and to maintain its strategic relevance, Nogales must innovate and enhance its logistics services, adapting to the evolving dynamics of cross-border trade. Investments in technology, improvements in customs processes, and binational collaboration are essential to reinforcing its position as a key hub for the transportation of perishable products in northern Mexico. The consolidation of these commercial links is strongly influenced by the geographic distribution of borders, territories, and the distances between production nodes and final product destinations. This reflects a reorganization of production chains in this subsector, a process further intensified by the current environment of trade conflicts and nearshoring. Consequently, agricultural GVCs appear to be increasingly concentrating on a regional rather than a global dimension, an issue that future research will need to examine from an ontological perspective.

Finally, the four points discussed above suggest that the analyzed GVC exhibits a market-type governance structure. As outlined in the theoretical framework, this governance type is characterized by a relatively low level of influence from the lead firm, in this case, wholesale companies such as supermarkets and restaurant chains. The primary control mechanism is the market-determined price, and the relationships among the various agents or actors within the chain remain comparatively stable. It is noteworthy that this governance type features low entry barriers, resulting in frequent changes of suppliers.

Regarding the determinants of this type of governance (see Table 1), the following observations can be made: (i) the complexity of communication between agents for transmitting information and knowledge about demanded products is low, as fruits and vegetables are largely standardized and do not require extensive specifications; (ii) considerable skills are needed to interpret and act on information provided by final customers, as the results indicate that both produce companies and producers have diversified their products and processes in response to evolving consumption patterns; and (iii) a high capacity on the part of suppliers (producers) is essential to meet customer requirements regarding the color, shape, and size of fruits and vegetables.

When these three factors are considered together, which collectively determine market-type governance in the GVC, two relevant consequences emerge, as noted by ^{Ponte (2019)}. First, the low specificity of the products allows the lead firm to shift costs onto the companies lower in the chain, a topic that warrants further investigation due to its significant implications for the economic and social development of agricultural areas in Sonora and Sinaloa. Second, this same low product specificity generates increased competition among producers. Consequently, and this is the key insight, the improvement of a producer is achieved by moving up within the GVC through changes in function or economic activity, such as transitioning from a producer to a distributor, which is precisely the phenomenon observed among the Mexican farmers analyzed in this study.

CONCLUSIONS

This study analyzed the horticultural global value chain (GVC) in northwestern Mexico, with a particular focus on Sonora and Arizona, highlighting how producers in this region have achieved functional upgrading. Functional upgrading is understood as the continuous learning process by which horticulturists align their agricultural practices with those of developed economies, while also incorporating specific functions such as negotiating with large buyers, opening new distribution channels, analyzing market demand, and capturing competitive advantages in the food market. This process effectively enables producers to transition into distributors in international markets, particularly in the United States. This transformation was examined within the theoretical framework of GVCs.

The study identified a process of adaptation and diversification in response to the demands of the North American market, including the expansion of exported product varieties with specific qualities, such as taste, color, size, and shape, tailored to consumer preferences, while also enhancing nutritional value. Furthermore, the geographic location of Nogales emerged as a key node for the international trade of horticultural products, serving as a direct route to the North American market and facilitating the development of the produce industry. The findings also highlight the increasing complexity of activities within the GVC, which introduces new governance challenges, shifting from a vertical, hierarchical model dominated by a major buyer toward a more horizontal approach characterized by relational and modular governance and inter- local cooperation.

The study demonstrates that interaction and trust between producers and distributors have been central to effective adaptation to changing market conditions, emphasizing the importance of innovative practices and efficient supply chain management for global competitiveness. These findings are crucial for understanding the dynamics of GVCs and their capacity to respond to contemporary environmental and economic challenges, calling for a reconsideration of traditional approaches to the international division of industries, with greater attention to specific geographies and the emergence of regional value chains.