This paper explores the economic motivations of the agroindustrial firm to contract with smallholders, the economic motivations of smallholders to participate, and some of the problems which arise in the course of the venture. One thing that is very clear is that there are many reasons why a firm might not want to contract with small-scale producers. Despite the rhetoric that the peasantry was being subordinated to large producers, the reality was often that the peasantry was largely marginal to such lucractive enterprises as export fruit and vegetable production, and often shut out of or discriminated against in domestic supply systems as well (so-called mercados controlados). It was not so much that they were being exploited, but that they were excluded from the most profitable activities--not so much that they were victims of capital, but that capital had studiously avoided dealing with them. Here we attempt to develop some theoretical explanations for this reality -- and for such observed phenomena as price discrimination when peasants do participate -- and to show how they have worked in some concrete situations in Mexico.
