“Mexico’s New Paradigm; Flop?”
When a nation’s voters dramatically embark on a new paradigm with a new President and Congress, they look to the first 100 days of the new government for proof their votes counted.
Mexicans are now assessing the change they voted for as new President Andres Manuel Lopez Obrador (known as AMLO) has locked down his first hundred days as President with majorities in both the Chamber of Deputies and the Mexican Senate.
AMLO retains a high approval rating among Mexicans despite his first 100 days.
As far as the border with the United States is concerned, the six states bordering the U.S. were delighted when he announced that the national tax known as IVA, a sales and transaction tax of 16%, would be halved along the border to 8% in an effort to keep millions of Border Mexicans home to buy goods and services rather than crossing the border into San Diego, Arizona and Texas to annually spend billions of dollars.
The ugly economic reality is that with a 16% tax an item that costs a dollar on both sides of the border has 16% added by Mexico making that purchase $1.16. 100 feet north of the border, the same article costs $1.00 plus – in San Diego – an 8% sales tax added totaling $1.08.
The Mexican government also imposes the 16% IVA tax on services government provides; for example, residential water and electricity. The State of Baja California provides water and electricity to its residents. For every 100 pesos (approximately $5.00 dollars) it charges 16 pesos for the IVA tax making the total the customer pays 116 pesos, almost a fifth higher.
AMLO announced the tax cut along with a mandated doubling of the minimum wage along the border in an effort to boost business.
Unfortunately, the nationally inexperienced rookie (former Mayor of Mexico City) didn’t realize that the tax cut and minimum wage increase were hobbled by so many restrictions and qualifications they haven’t yet taken effect.
Only one percent of Baja California businesses have qualified to cut the tax in half and very few workers have received a doubling of the minimum wage. Why? Because so few Mexicans actually work for minimum wage in Baja California — in Tijuana or its state capitol, Mexicali.
The tax cut has not occurred yet. The minimum pay increase doesn’t apply because few workers in Baja California work for minimum wage. Reason: Worker shortages in the booming manufacturing sector of Baja California force employers to pay better than any other employers in Mexico.
For example, over 12,000 workers in Tijuana, its beach suburb of Rosarito Beach and in the desert capitol of Mexicali work for Korean companies Samsung, LG and Formosa giant Foxconn producing flat screen television sets in factories that operate 24-hours a day.
These are not $5 dollars-a-day workers. Nor are most of the 64,000 people who work in the medical device industry in Tijuana and Mexicali. Thus, any effect on the labor force by AMLO’s minimum wage policy along the California border is minimal.
The fact that a San Diegan can buy a 43-inch flat screen television made 20 miles south of the 8th largest city in the U.S. for $229.00 plus $18.32 California sales tax provides the hunger for workers in Tijuana that were not even imagined in the days when it was world famous as the original “Sin City.”
Until AMLO streamlines the ability for Mexican-retailers to cut the 16% sales tax in half, that same $229.00 television set will cost the Tijuanan $229.00 plus $36.64 Mexican retail tax for a total of $265.64. That is $18.32 more than the set can be bought for in San Diego. Couple that with one or two hundred dollars’ worth of groceries and one sees clearly why it is cheaper for Mexicans to cross the border to spend the billions of dollars they spend every year in San Diego, Yuma, Nogales, El Paso, Laredo and McAllen, Texas.
Bad AMLO move.
Another AMLO flop is his decision to abandon the gigantic new airport outside Mexico City on which the government has already spent billions of dollars. He ordered a peoples’ “referendum” to underpin his decision whether or not the airport construction should continue. A million people voted to stop construction. There are over 125 million Mexicans. AMLO shut down the construction.
His new plan is to expand the current airport and expand and use another airport and the military airport in Mexico City creating a new mess of utilizing three airports in the same airspace.
Another AMLO failure is his assignment of the Mexican Army to guard oil pipelines of the PEMEX national oil company that organized thieves have taken over providing millions of dollars in illicit revenue to organized criminals and creating gasoline shortages in cities throughout Mexico.
All this, in 100 days.
Now, AMLO’s political party, MORENA, is moving through the Congress and state legislatures a constitutional change permitting reelection which has been banned by the Mexican Constitution —NO REELECTION — since 1917. AMLO say he would not run for reelection if the law allows it. Can he be trusted?
AMLO has been a 100-day failure. Mexico is no better off than it was before AMLO became President. Question: Will Mexico be better off in the next 100 or 1000 days under AMLO?