Mexico’s president flew to Tijuana on Sunday to champion his plan to grow the economy of the country’s northern border region by lowering taxes, increasing the minimum wage and pegging gasoline prices to those of neighboring U.S. communities.
In his first presidential visit to Baja California, Andrés Manuel López Obrador said the measures are part of a national development plan whose aim is to keep Mexicans at home, so that “that migration is an option, but not obligatory.”
The president was joined by Mexico’s economy secretary, Graciela Márquez Colín and Baja California Gov. Francisco Vega de Lamadrid as he promoted his plan to the state’s political and economic leaders gathered at a hotel in the city’s Río Zone. His visit to Tijuana came on the heels of similar visits in two other border cities, Reynosa and Ciudad Juárez.
The plan cuts the value-added tax along the northern border by half from the national rate of 16 to eight percent. It reduces income tax from 30 to 20 percent, a measure aimed at drawing both national and foreign investment to the region. It doubles the minimum wage to 176 pesos a day, just over $9. It also brings gasoline prices in border cities in line with those of neighboring U.S. communities.
As López Obrador landed at A.L. Rodríguez International Airport, groups of demonstrators clamored for his attention. Some were residents of El Rubí, a hillside neighborhood where homeowners are seeking government compensation after losing their houses in a landslide.
Others came from Mexicali, the state capital, to oppose the construction of a large U.S.-owned brewery, Constellation Brands. In the city’s Río Zone, a few dozen demonstrators demanded stricter immigration controls in line with national security, and protested the presence of Central American migrants as they wait to seek asylum in the United States.
The President also received private petitions, including one from the governor asking that the federal government send funds to support the state’s strapped educational system and compensate for the large numbers of deportees and migrants, according to a high-ranking state official.
But publicly, the focus of the visit was solely on the new zone that encompasses 43 municipalities in six Mexican border states, including all five municipalities that make up the state of Baja California. The initial designation is for two years, and López Obrador promised to return in three months to evaluate progress of the zone, part of a national development plan.
The president said the idea for the “free zone” was born in Tijuana during a campaign trip to the city. The initial proposal came from a group of business leaders who petitioned for the special designation.
The new zone covers some of Mexico’s most dynamic areas. The region’s overall growth rate of 3.1 percent from 2013 to 2017 exceeded the national average of 2.6 percent during that same period. The aim is to spur growth even further, said Márquez Colín, the economy minister.
“We want this growth to be the locomotive…of the rest of the national economy,” she said, stressing Tijuana’s close link to the southern California economy. “To live in Tijuana is to live in the CaliBaja region, of enormous productive potential.”
The largest city on Mexico’s northern border, Tijuana epitomizes both the opportunities and challenges faced by communities on the U.S. border. The city has been doing well economically, creating jobs and drawing foreign investment, but at the same time it has struggled with insufficient infrastructure, social inequality and a high homicide rate fueled by the neighborhood drug trade.
A left-of-center populist who has vowed to eradicate corruption, López Obrador came into office following a landslide victory last July. His depiction of the border as a place of economic opportunity stood in contrast to President Donald Trump’s focus on the border as a security issue.
On Sunday, even members of the Tijuana business community who opposed López Obrador’s candidacy applauded the Free Zone. Rafael Carrillo Barrón, owner of the Tijuana’s Zonkeys basketball team, called it “a very positive message.”
“It will be very beneficial for us, to pay less taxes, it’s going to make us more competitive,” he said. “So far we’re very happy with this, after two years from now, we’ll talk.”
Mexico’s northern border for much of its history has benefited from a special economic status conferred by the federal government because of its proximity to the United States. The measures had been designed to make the region competitive with U.S. communities. But in recent years, resident have seen the erosion of these privileges, much to the dismay of the business community.
Lowering the value-added tax will mean lower prices for residents of Tijuana — about half the population — who don’t have a visa that allows them to shop in the United States, said Aram Hodoyan, President of the Tijuana Economic Development Council.
“It’s a first step, we are very grateful that he’s sitting down with us, and that we are talking and working things out,” Hodoyan said.
Business and government leaders say they have a broader vision for the region, the creation of a Strategic Economic Border Zone for Baja California. The plan contemplates improvements in infrastructure and education, investments in innovation, science and technology and the creation of higher-paying, higher-level jobs.
Both in Tijuana and San Diego, business leaders for years have been touting the interdependence of their economies. In the public forum, Gov. Vega supported the president’s program, and called for more fluid border crossings.
Paul Ganster, a professor at San Diego State University who has long studied the border, said the new measures “are likely to increase competition with U.S. border businesses.” But the U.S. businesses, he said, “have other advantages, such as better wholesale supply chains and lower finance costs.”
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