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Recession and oppresion cause border economies to suffer

By Jose Perez (Mexicomatters)

The old adage of the United States economy contracting the sniffles, causing pneumonia in economies around the world, is especially true of Baja California. And especially the Northern half of Baja California. To be even more specific, the economic barometer for Baja California Norte is Southern California.  When Southern California’s aerospace industry took a dive in the late 80’s the demand for gringo “second homes” in Baja was significantly impacted.  

As a foreign investment specialist in Mexico since 1984, I have seen my share of real estate booms and busts for “gringo” homes in Mexico.  I mentioned the 1980’s.  That was followed by another boom in the early ninety’s.  The halo effect of Mexico privatizing its economy and the passage of NAFTA inspired unprecedented foreign investment.  That boom ended in 1995 with the devaluation of the peso and the loss of foreign investor confidence.  After the U.S. bailout of Mexico (Mexico paid back uncle Sammy the loans made to salvage her economy) trust was restored and real estate investment enjoyed another short boom.  Until Punta Banda in 2000, when the oceanfront dream for 200 American families turned into a nightmare.

The Baja Beach and Tennis Club, a development located on the Punta Banda Penninsula, just 30 minutes South of downtown Ensenada, was a scam.  All two hundred families who bought there were evicted, representing a total investment loss of 80 million dollars. (see Punta Banda  These families were not innocent victims.  They were warned of the legal risks when they “bought” their properties.  But no matter, the media portrayed them as victims.  And Mexico still suffers from the fears created in the minds of second home buyers.

If investment trepidation, gasoline prices and the economy were not enough, a large segment of Baja tourists have stopped coming out of fear for their safety.  They are statistically safer here than in their U.S. homes, but hysteria has been created by yellow journalists, especially the Southern California press corp.


Another major factor in reducing investment, on both sides of the border, is an overdose of border security.  Hopefully our new president elect Obama will take another hard look at how best to secure our borders.  Do we put up more fences, more agents and the resulting longer delays to process border crossers or do we put those billions to work addressing the real causes of border insecurity?  The root cause of “illegal immigration” is unemployment and underemployment.  Americans were sold a “bill of goods” when NAFTA was proposed to increase jobs and provide fair compensation as an incentive for Mexican workers to stay home. 

U.S. multi-national corporations’ unwillingness to pay Mexican workers a decent wage is the broken promise of NAFTA.  Despite the increased costs of living in Mexico, since NAFTA, U.S. multinational companies still pay Mexican workers the equivalent of $65.00 dollars per week.  A strong incentive to migrate “illegally” is the result.  It is impossible for a Mexican family, subsisting on $65.00 per week, to maintain a dignified lifestyle.  So far, Washington’s answer to “the border problem” is a continuation of a failed policy of more fences, expensive surveillance technology and agents.

Homeland Security Secretary Michael Chertoff has already stated “Even if natural barriers such as canyons, rivers and shifting sand didn't make a full border wall impossible, fencing the nearly 2,000 miles simply would cost too much”.
The office of U.S. representative Duncan Hunter, Republican –California, estimates the wall would cost 3.2 million per mile. For 700 miles of fencing, the House of Representatives proposed, the cost is $6.4 billion.  Maintaining a "virtual fence" of cameras, sensors, aerial drones and other technology, would cost an additional $5.5 billion or more, says Republican representative Harold Rogers of Kentucky. Costs for those projects could double if they encounter the environmental and logistical problems that plagued construction for fourteen miles of secondary fence in San Diego in the mid-1990s.
Fences, barriers and other equipment to seal the border would require more agents. The U.S. Border Patrol presently has about 10,500 agents on the southern border, more than five per mile.  In his 2007 fiscal year budget, President Bush requested an additional $454 million for 1,500 new agents.  Add the additional costs of relocation and training and the price per agent is  $302,806.00 dollars.  If we hired 14,000 agents, the senate has proposed hiring, the costs rise to$4.2 billion.  Providing the same coverage that proved successful when the Border Patrol slowed traffic in El Paso in the mid-'90s, a total of 100,000 agents would be required at a cost of twenty one billion dollars.

Deborah Meyers, senior analyst for the Migration Policy Institute, a nonpartisan think tank in Washington, D.C., testified:  “The government would have a better shot at stopping illegal immigration if it invested those billions in developing the Mexican economy and eliminated backlogs for legal entry”.  Judy Gans, immigration policy manager at the University of Arizona's Udall Center for Public Policy declared: “The money also could fund a program to help employers verify that applicants are legally able to work in the United States”.  Those concepts have support from other analysts and politicians, but an expanded border fence has garnered the consensus in Washington.

Actual Costs
The cost of a 14-mile steel mesh fence in San Diego offers a reminder that projects can go over budget.  In the early '90s, officials estimated the secondary fence would cost $14 million – one million per mile.  John Pike, director of Virginia-based, a nonpartisan security-information Web site states:  “The first nine miles rang up at $39 million or about $4.3 million per mile”.  With all associated costs, the Department of Homeland Security approved an additional $35 million to complete the final five miles, three and a half of which were delayed by rugged terrain and legal wrangling about environmental concerns.  As a result, President Bush requested another $30 million in his 2007 budget.

All that would push the total cost for the 14-mile fence to $104 million, or $7.4 million per mile. With steep cliffs, rugged mountains, sand dunes, deserts and crossing seven hundred miles of private land in Texas, the project could encounter similar setbacks.  John Pike states: "The San Diego precedent demonstrates that this is clearly more complicated than it sounds at first blush.  It's not like fencing in your backyard so your dog doesn't get out."

Border Businesses Hit Hard
When the Silva Super Market opened in 1920, on the northern bank of the Rio Grande, a single wooden bridge connected El Paso and Ciudad Juarez. The U.S. Border Patrol didn't exist. Today, four concrete bridges arch above the concrete-funneled Rio Grande, connecting the two cities. Customs and Border Protection officers check everyone who crosses.  For nearly eleven miles, three layers of steel-mesh fence stand between the river and El Paso.  Hundreds of Border Patrol agents monitor the area day and night on dirt roads between them.

"We are one economy. I can't stress it enough. Any border town will probably tell you that," says Martin Silva, whose grandfather founded the store. "You have both American and Mexican nationals shopping in Juarez and El Paso, and that just contributes to the overall health of both countries’ economies." Money in the borderlands is fluid. Mexicans come to the United States to buy clothes, shoes, toilet paper and groceries. Americans head south for tequila, medicine and souvenirs, and to visit dentists and bars. About 960,000 people cross from one country to the other every day, the U.S. Embassy in Mexico reports.

From the late 1970s to 2001, Mexicans accounted for $2.3 billion a year in retail spending in Laredo, Brownsville, McAllen and El Paso, according to a  2006 study from the Federal Reserve Bank of Dallas.  “That's about 26 percent of total retail trade in the four Texas border cities and 2 percent of overall Texas retail sales”, according to Federal economist Roberto Coronado.  Suad Ghaddar, an economist with the Center for Border Economic Studies at the University of Texas-Pan American, states: “Mexican visitors have a three billion dollar impact on the Rio Grande Valley of south Texas. That spending supports more than 64,000 jobs. The impact in California is about $4.5 billion, supporting 67,000 jobs”.

Please let your new president and your congressional representatives know that this irrational and inhumane approach to our Southern border hurts everyone, whether Yank or Mexican.  And let’s put the blame on NAFTA’S failure to secure the border where it belongs; what economist and former Clinton Secretary of Labor,  Robert Reich calls “Super Capitalism”.  The corporate greed that caused the housing and Wall Street collapse is alive and well among multinationals in Mexico. Without government intervention and regulation (like the mortgage industry) these modern day Robber Barons will continue to exploit Mexican workers at the expense of all “Norte Americanos”.  Remember we are all Americans, both north and south of the U.S. border.

LeRoy Jose Amate Perez has been a foreign investment consultant since 1984.  His website  is considered the most complete guide to Mexican foreign investment.  You can contact Jose at 619 819 9369 or in Mexico at 011 52 646 1766759

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