Opinion

OPINION: Mexico’s New President Is A 100-Day Failure

REUTERS/Edgard Garrido

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 100 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.

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 percent — would be halved to 8 percent along the border 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 percent tax, an item that costs a dollar on both sides of the border has 16 percent added by Mexico, making that purchase $1.16. One-hundred feet north of the border, the same article costs $1.00 plus — in San Diego — an 8 percent sales tax, for a total of $1.08.

The Mexican government also imposes the 16 percent IVA tax on services government provides, such as 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 (a former mayor of Mexico City) didn’t realize that the tax cut and minimum wage increase were hobbled by so many restrictions and qualifications tat they haven’t yet taken effect.

Only 1 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. The reason is that  worker shortages in the booming manufacturing sector of Baja California force employers to pay better than any other employers in Mexico.

Over 12,000 workers based in Tijuana, its beach suburb of Rosarito Beach and in the desert capital of Mexicali work for Korean companies Samsung and LG, as well as the American Foxconn, producing flat screen television sets in factories that operate 24-hours a day.

These are not $5-dollar-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 their city for $229.00 — plus $18.32 in California sales taxes — provides a hunger for workers in Tijuana that was never imagined in the past, when it was world-famous as the original “Sin City.”

Until AMLO streamlines the ability for Mexican-retailers to cut the 16 percent sales tax in half, that same $229.00 television set will cost the Tijuanan $229.00 plus $36.64 in Mexican retail taxes. That is $18.32 more than the set can be bought for in San Diego. Couple that with $100 or $200 worth of groceries, and we can see 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.

AMLO also flopped by abandoning a gigantic new airport outside Mexico City in which the government has already invested billions of dollars. He ordered a people’s “referendum” to underpin his decision. One million people — in a country of 125 million — voted to stop construction. 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.

A final AMLO failure has been his decision to assign the Mexican army to guard oil pipelines of the Pemex national oil company. The company — whose executives AMLO has described as “white-collar huachi-coleros” — is a source of illicit revenue for organized criminals, and it has created gasoline shortages in cities throughout Mexico.

All this, in 100 days.

Now, AMLO’s political party, MORENA, is supporting a constitutional change permitting reelection, which has been banned by the Mexican Constitution since 1917. AMLO says he will not run for reelection if the law changes. Can he be trusted?

AMLO has been a 100-day failure. Mexico is no better off than it was before AMLO became president. Will Mexico be better off in the next 100 or 1000 days under AMLO?

Raoul Contreras is the author of “The Mexican Border: Immigration, War and a Trillion Dollars in Trade.” He formerly wrote for the New York Times’ New America News Service.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.