The president of Mexico, Andrés Manuel López Obrador, has introduced a new initiative with the goal of incentivizing Mexican citizens to remain in the country and not feel the need to go to the United States. He calls it the "zona libre" which runs along the entire US-Mexico border with a width of 25 kilometers. The free zones will have their sales tax reduced from 16% to 8%, their income tax cut from 30% to 20%, minimum wage doubled to 176.20 pesos, and fuel prices equivalent to the US. The goal of all these measures is to spur economic growth so that Mexicans as well as other foreign nationals from countries such as Honduras and Venezuela do not feel as compelled to cross the border. The president also hopes that with this economic boost, US companies may look to Mexican firms as an investment option. Some see this project as a great step to reducing imports and keep talent on the Mexican side of the border. Business owners and policy experts have expressed their concern about businesses being able to sustain such a raise wage hike. Ultimately, this could be seen as a benefit to the US as well since it will reduce migration. I personally think that this has a lot of potential and hope that it brings economic prosperity to regions that have needed it for a long time.
Source:
https://www.bbc.com/news/business-47119459
4 comments:
Having a low tax high wage zone certainly sounds like a way to attract people to work. It may also be the case that individuals who are in the United Stated illegally will potentially return to Mexico and settle in one of these areas. I also find it interesting that Obrador, who was so often cast as the Bernie of Mexico, finds that one of his best solutions is to cut taxes in an attempt to incentivize economic growth.
It'll be interesting to see if some companies relocate to areas with cheaper labor or if rural populations in the rest of the country will feel any bitterness in not getting these benefits to attract workers to their areas. I'm also curious how he plans on sustainably lowering gas prices after their recent shortage and major theft issues. Regardless, it's nice to see the government trying something to change the economic situation.
In reading this article, I cannot help but be struck with deja vu. Does it not seem very similar to what the Spanish government thought about doing with their "lost generation?" In the end, it was a combination of improved education and higher paying, highly skilled jobs that prevented their people from emigrating to the UK.
Josh, I think this is quite interesting. I think this could be beneficial for both the US and Mexico and the entire global economy as well. These tax incentives some very enticing if I'm a citizen in Mexico. I would personally want to try and strengthen my home country, and that's what it seems Obrador is trying to do. If the Mexican economy can grow, then like you said, this could increase US investment there. We are shifting towards a global and almost borderless economy, so why not have a lot of strong countries, as opposed to a handful.
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