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Chile industry seeks tax incentive for farmers

By Melanie Dabovich

Associated Press

ALBUQUERQUE, N.M. — Chile industry officials are turning up the heat on state government to help secure the future of New Mexico’s signature crop.

The New Mexico Chile Association is proposing that farmers receive a $200 tax incentive for each registered acre of chile they grow. The proposal was outlined during a legislative committee meeting last week.

"Farmers are having a difficult time financially penciling in the ability to grow chile peppers, mainly due to the high cost of labor and labor inputs," said Dino Cervantes, association treasurer and general manager of chile processor Cervantes Enterprises, Inc.

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New Mexico’s chile industry is struggling to stay alive due to a lack of workers, high labor costs, foreign imports and increased farming operation costs.

"They just do not have the work force to harvest the chile crop. There have been points where there is chile that they can’t harvest and they have to plow the fields under," said Charlie Marquez, a lobbyist for the chile association. "The rate at which we are losing chile farmers is incredible. There is not enough supply in New Mexico to meet the demand."

Harvested acreage dropped from 37,000 acres in 1993 to around 11,000 in 2007, and Cervantes said about 60 percent of the total crop cost goes to hand labor.

The proposed incentive — a tax credit taken against personal income tax obligations — was presented to the Legislature’s interim Economic and Rural Development Committee. It would take effect next summer and end in 2011 and cost the state an estimated $2 million annually during its duration, Marquez said.

The tax credit would help farmers as they move from traditional hand labor to mechanized harvesting. Though 80 percent of the state’s red chile crop is currently machine harvested, green chile is harvested by hand.

Researchers at New Mexico State University and the farming industry are developing machines and machine-friendly chile varieties to mechanize the green chile harvest in an effort to reduce hand labor and help farmers turn a profit.

Cervantes said the tax incentive would help keep chile growers from switching to other profitable, mechanized crops such as alfalfa and corn.

Despite the state’s rough economic outlook, Marquez said he believes the tax request is modest, citing its short timeline. He said this marks the first time the association has asked the Legislature for tax credit specifically for chile farmers.

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Cervantes said losses in the chile industry could affect income to the state. Over the last three years, the value of the industry dropped from $400 million to $235 million, he said.

"If we don’t do something soon, if we lose another 20 percent of the industry, that would equate to about another $50 million in lost income to the state," he said. Processors also need a reason to stay. "If they decide to move, the likelihood of them coming back is an unrealistic proposal."

Cervantes said the goal is to move to full machine harvesting and bring the state’s chile industry back to its heyday.

"The idea is to create a bridge to get over this one last hump," Cervantes said.

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