Mexico stands to benefit from the down US economy . Rooted in the rules of NAFTA the States cannot directly take a protectionist role, so it is content to allow the media to play this protectionist role. The television in the States – over the last year – has portrayed Mexico as being near an economic fall out and civil unrest . The Mexican people are either beheaded, kidnapped, poor, corrupt, or narco-traffickers. The American news media was particularly aggressive in the weeks before spring break. The main reason for this is money . During that two-week period, over 120,000 young American citizens poured into Mexico and left behind hundreds of millions of dollars.
Let’s look at the reality of the massive drug and corruption problem, kidnappings, murders and money. The U.S. Secretary of State Clinton was upfront in regards to her view of the problem. “Our insatiable demand for illegal drugs fuels the drug trade. Our inability to prevent the weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians,” Clinton said. Another hugely illegal business that is smuggled into the U.S.A. that no one likes to talk about is Human Traffic for prostitution. This “business” is globally now competing with drugs in terms of profits.
It is critical to understand, however that the hideous violence in Mexico is over 95% confined to the three transshipping cities for these two businesses, Tijuana, Nogales, and Juarez. The Mexican government is so serious about fighting this, that they have committed over 30,000 soldiers to these borders towns. There was a attentive article written by a professor at the University of Juarez. He was reminded of the Prohibition years in the U.S.A. and compared Juarez to Chicago when Al Capone was conducting his reign of terror capped off with The Saint Valentine’s Day Massacre. During these years, just like Juarez today, 99% of the citizens went about their business and attended classes, went to the movies, restaurants, and parks.
Is there corruption in Mexico? YES !!! Is there an equal amount of corruption related to this business in the U.S.A.? YES !!! . When you have a pair of illegal businesses that generate over $300,000,000,000 in sales you will find massive corruption. Don’t underestimate the Mexican Drug Cartel; these “businessmen” are 100 times more sophisticated than the bumbling bootleggers during Prohibition. They form profitable alliances all over the U.S.A. They do cost benefit analysis of their business much better than the US auto industry . They have found over the years that the cost of bribing U.S. and Mexican Border Guards and the transportation costs of moving cannabis from Sinaloa to California have cut significantly into profits . That is why over the past 5-7 years they have been growing marijuana in State and Federal Parks and BLM land all across America. From a business standpoint, this is a saves them big time on many accounts . Let’s look at California as an example as one of the largest consumers. Edit this text , there is savings on transportation, less loss of product due to confiscation and an overall reduction cost of bribery with law enforcement and parks service people. Another great savings is the benefit to their employees. If caught you face up to 15 years in Mexico. In California typically you can be out of jail in 8 months . The same economic principles are now being applied to the methamphetamine factories.
FOX News continues to scare people with its focus on kidnapping . There are kidnappings in Mexico . The concentration of kidnappings has been in Mexico City, among the very rich and the three aforementioned border Cities. Here is a real shocker: the second most kidnappings in NAFTA cities (1st is Mexico City) is Phoenix, Arizona with over 359 in 2008. The Phoenix Police estimate that twice that number of kidnappings goes unreported, because like Mexico 99% of these crimes were directly related to drug and human traffic . Phoenix, unfortunately, is geographically profitable transshipping location. Mexicans, just like 99% of U.S. Citizens during prohibition, go about their daily lives all over the country. They get up, go to school or work and live their lives untouched by the border town violence.
These same protectionist news sources have misled the public as to the real danger from the swine flu in Mexico and temporary devastated the tourism business . As of May 27 2009 there have been 87 deaths in Mexico from the swine flu. In those same 5 months there were over 30 children murdered in Chicago . By their logic, if 87 deaths from the swine flu in Mexico warrants canceling flights and cruise ships to Mexico, then close all roads and highways in the USA because of record 43,359 automobile related deaths in the USA in 2008 .
What is just getting underway is what many are calling the “Largest southern migration to Mexico of people and real estate assets since the Civil War” A significant percentage of the Baby Boomers have been doing the research and deciding to go south of the Border to countries like Mexico The number one retirement destination in the world is Mexico. Right now there are over 2 million American and Canadian homeowners in Mexico with the majority in Cabo San Lucas Real Estate, Cancun, Puerta Vallarta, Rocky Point, and San Miguel de Allende The most conservative number of American and Canadian Baby Boomers who are on their way to owning property in Mexico for full or part time living in the next 15 years is over 6,000,000. If six million people buy on average a $250,000 property that is a huge amount of money going to Mexico and you will understand why the U.S. Government is trying to tax this massive shift of money to Mexico through H.R. 3056. The U.S. government calls this “The Tax Collection Responsibility Act of 2007”. Those who will have to pay it are calling this the EXIT TAX.
Another large exodus from the U.S.A is high paying skilled jobs. The job shift in automobile sector, both car and parts manufacturing, is already known by most investors. In the last few months as John Deere and Caterpillar have been laying off thousands of workers in the U.S.A., and hiring equal numbers in Mexico. The most recent industry that is making the shift is the aerospace manufacturers . In the city of Zacatecas there is currently a $210 million aerospace facility being built. With the 11 U.S. companies moving there, it is estimated to provide over 200,000 jobs for many years to come . One of the main factors for the shift in job south to Mexico instead of China is realistic analysis of total production, labor and delivery costs. While it is cheaper to produce in China , the cost to transport and underlying risks of a long distance supply chain , and quality control issues, gives Mexico a distinct financial advantage .
Mexico has avoided completely the subprime problem that has devastated the U.S. banking industry . The Mexican banks are healthy and profitable. The Middle Class is an ever growing segment in the Mexican population . Financing in the residential sector has Mexico in a unique position of having over 90% of current homeowners owning their house outright. U.S. banks are competing for the Mexican, Canadian and American cross border loan business. It is and will continue to be a very safe and very profitable business. These same banks that were loaning in a reckless manner have learned their lesson and are loaning here the old fashioned way. They require a minimum of a 680 credit score, 30% down payment, and verifiable income that can support the loan. In most areas of Mexico where Baby Boomers are moving to, with the exception of Puerto Penasco (which did not have a national and international base of buyers), there
is no real estate bubble. The higher end markets ($2-20 million) in many of these destinations are going through a modest correction. The Baby Boomers market here is between $200,000 and $600,000. With the continuing demand in the Los Cabos Real Estate region, that price point, in the coming years, will disappear. This is the reason the Mexican government is spending billions of dollars on more infrastructure north along the coast all the way up to Mazatlan.
The other major area where America has become overpriced is in the field of health care. This massive shift of revenues is estimated to add 5-7% to Mexico’s GDP. The name for this “business” is Medical Tourism. The two biggest competitors for Mexico were Thailand and India. Thailand and India’s biggest drawback is geography. Also recent events, Thailand’s inability to keep a government in place and the recent terrorist attack in Mumbai, have helped Mexico capture close to half of this growth industry. In Mexico today there are over 56 world class hospitals being built to keep up with this business.
Mexico is currently sitting on a cash surplus and an almost balanced budget. Most Americans have never heard of Carlos Slim until he loaned the New York Times $250 million. After that it became clear to many investors around the world what Mexicans already knew: that Mexico had been able to avoid the worst of the U.S. economic devastation. There is much to be said about Mexico’s resiliency . When the U.S. Federal Reserve granted a $30 billion loan to each of the following countries Mexico, Singapore, South Korea, and Brazil, Mexico took the money and put it into US Treasuries .
According to oil traders, Mexico’s Pemex wisely as the price of oil shot to $147 a barrel put in place an investment strategy that hinged on oil trading in the range of $38-$60 a barrel. Since the beginning of 2009 Mexico has been collecting revenues on hedged positions that give them $90-$110 per barrel today. Mexico’s recent and under reported oil breakthrough in the Palaeo Channels of Chicontepec makes it 3rd in the world in regards to oil , right behind Canada and Saudi Arabia.
The following is a quotation from Rosalind Wilson, President of the Canadian Chamber of Commerce on March 19, 2009. “The strength of the Mexican economic system makes the country a favorite destination for Canadian investment”.
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