In a rather surprising move, the new left-wing populist president of Mexico — Andrés Manuel López Obrador — just announced a dramatic new plan for the border region his nation shares with the United States that actually supports and coincides with President Donald Trump’s overall agenda on border security and immigration.
No, the Mexican president didn’t sign a check to fund construction of the proposed border wall or deploy the military and minefields to discourage cross-border excursions to the north, but rather announced an economic “free zone” along the border that would attract investment and create new jobs and provide an economic incentive for migrants to remain in Mexico instead of illegally crossing into the U.S. for economic reasons.
The San Diego Union-Tribune reported on Obrador’s announced Tax Incentive Decree for the Northern Border Region of Mexico.
That decree will create a “free zone” roughly 15.5 miles wide along the 2,000-mile long border, from the Pacific coast to the Gulf of Mexico, that will feature dramatically reduced taxes, a doubled minimum wage and certain commodities priced similar to that found across the border in the U.S.
The income tax rate in the “free zone” would be reduced by one-third, from 30 percent to 20 percent, while the Value Added Tax for imported goods would be cut by half from 16 to 8 percent. That’s aimed at spurring business growth, which would increase employment.
Meanwhile, Mexico’s minimum wage would be doubled in the zone to 176 pesos — or about $8.80 — per day, while gasoline would be priced the same as it is in the United States.
“It’s going to be the biggest free zone in the world,” Obrador said, according to the Union-Tribune. “It is a very important project for winning investment, creating jobs and taking advantage of the economic strength of the United States.”
“Migration should be a choice, not forced,” he added, in reference to how the plan will improve economic conditions and provide an incentive for Mexicans and other migrants to remain working in Mexico, which would result in fewer migrants attempting to enter the U.S. illegally for economic purposes.
It’s important to point out that virtually all of the steps Mexico’s president is proposing — job creation, lower taxes — are in line with the Trump economic policies that have rejuvenated the American economy. Imitation is the sincerest form of flattery.
While it is quite likely that this plan by Obrador will indeed lead to economic improvements in Mexico’s northern border region and a reduction in illegal immigration northward, it also comes with some risks too, as the Mexican government could see a reduction in overall tax revenues and some businesses may experience trouble in hiring enough employees due to the dramatic increase to the minimum wage.
The director of the Mexico Institute at the Wilson Center in Washington D.C., Duncan Wood, told the Union-Tribune the goal of cutting the VAT by half is to make Mexican businesses more competitive with their U.S. counterparts: “Maybe you’ll get a lot more American tourists coming across to buy things.”
He warned, however, “But one of the great fears is that a lot of Mexican companies will move their headquarters there (within the free zone) so they don’t have to pay 16 percent value added tax on their products.”
While that would be good for the free zone, it would likely result in less tax revenue collected overall by the Mexican treasury. Wood added, “If a lot of companies relocated to the border, then the Mexican government loses a fortune.”
There is a similar benefit/risk equation to figure out with the doubled minimum wage as well, in that the higher wages would certainly be beneficial for workers with jobs in the border region, though the higher cost of labor could also cause business owners to hire fewer workers, limiting the overall benefit of the higher wages. (That, of course, is the chronic problem with the minimum wage hikes in the U.S. that liberals love so much.)
To be sure, this economic plan put forward by Obrador is not the be all and end all of addressing the illegal immigration situation at the border, but it is an incredible step in the right direction and should have a positive effect by eventually reducing the number of economic migrants illegally entering the U.S.
This plan will undoubtedly take some time to roll out and its impact most likely won’t be felt immediately — and there are certainly other things Mexico could do to improve the immigration situation as well — but it addresses the primary motivation behind illegal immigration into the U.S. and amazingly shoulders the economic risks that come with it, such as the potential for reduced tax revenues and increased labor costs issues.
When the leftist populist president was elected in Mexico, there was some fear that he would implement absurd socialist economic policies that would prove harmful to the U.S. and result in an increase to illegal immigration.
Incredibly, however, he has instead announced an economic policy that will be beneficial to both Mexico and the U.S., both in terms of economic growth and illegal immigration, and that is definitely something worth acknowledging.
Author: BEN MARQUIS
Source: Westernjournal: Mexican Pres. Bows to Trump. Announces 2,000-Mile ‘Zone’ To Help Stop Illegals