Mexico launches plan to stimulate US border economy

MEXICO CITY (AP) — President Andres Manuel Lopez Obrador launched an ambitious plan last Saturday to stimulate economic activity on the Mexican side of the United States (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 eight 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 USD9.07 at current exchange rates.

Lopez Obrador, who took office on December 1 last year, 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.

Speaking from Ciudad Juarez, a manufacturing hub south of El Paso, Texas, Lopez Obrador said on Saturday he agrees with Trump that Mexican wages “should improve”. He decried, for instance, that Mexican auto workers earn a fraction of what their US counterparts take home, topping out at just USD3 an hour versus a typical wage of USD23 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 USD5.6 billion to expand the wall that separates the two countries.

Economy Minister Graciela Marquez noted on Saturday that the border region targetted for economic stimulus accounts for 7.5 per cent of Mexico’s gross domestic product.

Mexico’s President Andres Manuel Lopez Obrador. – AP