Mexico City: President Andres Manuel Lopez Obrador launched an ambitious plan Saturday to stimulate economic activity on the Mexican side of the US-Mexico border, reinforcing his country’s commitment to manufacturing and trade despite recent US threats to close the border entirely.
Mexico will slash income and corporate taxes to 20 per cent from 30 per cent for 43 municipalities in six states just south of the US, while halving to 8 per cent the value-added tax in the region. Business leaders and union representatives have also agreed to double the minimum wage along the border, to 176.2 pesos a day, the equivalent of $9.07 (Dh33.3) at current exchange rates.
Lopez Obrador, who took office on December 1, said the idea is to stoke wage and job growth via fiscal incentives and productivity gains. US President Donald Trump has repeatedly complained that low wages in Mexico lure jobs from the US Mexico committed to boost wages during last year’s negotiations to retool its free trade agreement with the US and Canada.
$3typical wage of Mexican autoworkers; their US counterparts earn typically about $23/hr.
Speaking from Ciudad Juarez, a manufacturing hub south of El Paso, Texas, Lopez Obrador said Saturday he agrees with Trump that Mexican wages “should improve.” He decried, for instance, that Mexican autoworkers earn a fraction of what their US counterparts take home, topping out at just $3 an hour versus a typical wage of $23 an hour in the US.
Yet the economic plan comes at a delicate moment for the border region. Trump threatened as recently as last week to close the US-Mexico border “entirely” if Democrats refuse to allot $5.6 billion to expand the wall that separates the two countries.
Economy Minister Graciela Marquez noted on Saturday that the border region targeted for economic stimulus accounts for 7.5 per cent of Mexico’s gross domestic product.
And in recent years, she said, the 43 municipalities included in the plan have boasted combined economic growth of 3.1 per cent, above the national average of 2.6 per cent for the six years through 2017.
Much of that robustness owes to trade and proximity with the US, the world’s biggest economy.
“We have to take advantage of this locomotive that we have on the other side of the border,” she said.
Marquez expressed optimism that the stimulus plan will direct more Mexican and foreign investment into the border region. The plan for the border region is part of what Lopez Obrador calls “curtains of development” to shore up different corridors of the country so that Mexicans stay rather than migrating in search of better economic prospects.