Monday, January 07, 2019

AMLO's Border Plan

AMLO has plans to stimulate the economies of Mexican border cities as a way to increase incentives for Mexicans to stay in the country. Immediately I thought of unintended consequences.
Under the plan, Mexico is to cut income and corporate taxes to 20 percent from 30 percent in 43 municipalities in the six Mexico states along the 2,000-mile border with the U.S. Half of that border is along the Rio Grande and Texas. 
Mexico, Lopez Obrador said, will also slash to 8 percent the value-added tax in the region and double the minimum wage for border residents to 176.2 pesos a day, the equivalent of $9.06.
If you raise wages only at the border, you can expect Mexicans from other parts of the country to move there. It is especially problematic because the poorer, more rural, more indigenous areas in southern Mexico have traditionally been ignored in favor of the more developed north. NAFTA exacerbated wage inequality, for example. Even more inequality could strain northern cities that are already struggling to deal with all the asylum seekers waiting there.

Further, it's not clear how this would affect the growing number of Central American migrants already there. Presumably they would not be eligible for the new wage unless the definition of "border resident" is loose. It's not clear what AMLO thinks will happen to them, or what he hopes will happen.


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