Saturday, February 11, 2012

Mexican president launches Strategic Economic Zone for Baja California region

 — In an action aimed at increasing the competitiveness of the Baja California region, President Felipe Calderón came to Tijuana on Friday and launched the Strategic Economic Zone by eliminating import duties on 200 products.
The move comes after years of clamor from the state’s business and political leaders. They have argued that Baja California businesses lose many Mexican consumers who are enticed across the border to stores with greater variety and lower prices.
“This will allow Mexican businesses to offer imported products at much more attractive prices, and this way we will fortify economic activity and generate more jobs for our people,” Calderón said during an outdoor ceremony held just yards from the San Ysidro border crossing.
The measures were outlined in the “Decree for the Competitivity and the Reduction of Tariffs of the Border Economic Zone,” signed by Calderón before the state’s top political and business leaders, including Gov. José Guadalupe Osuna Millán and Tijuana Mayor Carlos Bustamante.
The decree comes a month after the Mexican federal government slashed its high tariffs on 204 Chinese products. While the dropping of that trade barrier applies across Mexico, Friday’s decree is restricted to the states of Baja California, Baja California Sur and a portion of the state of Sonora.
Together, the actions will lead to lower prices for a range of goods including clothing, shoes, canned fish and wine, Calderón said.
With creation of the new zone, “we now have an instrument to help us combat the flight of consumers that has afflicted us so strongly,” said Mario Escobedo Carignan, leader of a powerful umbrella group in Tijuana, the Business Coordinating Council. “What we hope is that they can find products here at the same price that they can find in the United States.”
Escobedo said Friday’s decree is only the first step toward increasing the region’s competitive strength. Future steps for the zone would include federal and state funds for businesses that bring new technologies to Baja California, as well tax breaks for key sectors such as aerospace and biotech, he said.
Business and political leaders in Baja California have been lobbying the federal government to establish the special zone, saying conditions at the border are far different than those in central Mexico, where shoppers don’t have the option of crossing into the United States. They had met with stiff opposition from business groups in central Mexico.
“For the president of Mexico to do this in face of huge political interests in other parts of Mexico is a big deal,” said Christina Luhn, director of the Mega-Region Initiative for the San Diego Regional Economic Development Corporation.
Surveys by the San Diego-based Crossborder Group Inc., a market research firm, have shown that Baja California consumers who shop in San Diego County typically buy goods such as clothing, shoes and electronics. Kenn Morris, the group’s president and CEO, said shoppers spend about $200 million to $250 million a month in retail stores of San Diego and Imperial counties.
While the lifting of tariffs and import duties is likely to encourage more Baja California residents to shop in Mexico, it is not likely to eliminate cross-border commerce, analysts said.
“They’re not going to quit coming across the border, because they don’t have the variety of things and the same shopping experience,” Luhn said.
Martín Ramírez Urquidy, head of the economics department at the Autonomous University of Baja California in Tijuana, estimates that the new measures will lead to 8 percent to 10 percent less demand for products in the U.S. among Mexicans in the region.

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