Despite on-going change, rural areas remain characterised by relative abundance of natural capital, and by distance and the relatively high cost of movement. They are also home to most of the world's poor. Compared with urban areas which enjoy proximity to customers and producers, rural areas may have comparative advantage only in primary activities based on immobile natural resources and closely related activities. There are differences, however, between 'peri-urban', 'middle countryside' and 'remote' areas. In some areas, economic growth, urban expansion, and improved transport and communications create new urban-oriented opportunities for rural services and labour. Remote areas will continue to present special difficulties, however; and, in general, the potential for nonagricultural diversification is less than is sometimes argued.

This contribution examines the impact of profound changes to agricultural policy implemented since 1988 on the livelihoods of Mexico's rural population. Detailed studies in four villages show that rural incomes are very unevenly distributed within communities leaving half of households in poverty. During the last decade key factors affecting village economies have been international and national, rather than specific changes to farm policy. Most changes have been to the detriment of the communities studied, but peasant households have adapted and survived, at a price. If the worst fears about the consequences of economic liberalisation have not been realised, neither have the hopes. Depressed markets for basic goods and services have limited the growth of the rural economy. Private investment and provision of services have not been stimulated.agricultural policy, central Mexico, economic liberalisation, private investment,

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