Categories
COVID-19

Crisis in Paradise

Cancún Airport (CUN) Traffic

In 2018 tourism accounted for 8.7% of Mexico’s GDP and earned the nation 22.4 billion USD in foreign currency income.

Being the gateway to one of the world’s best tourist destinations, the airport at Cancún (CUN) became Mexico’s second busiest after Mexico City’s (MEX). In 2019 CUN served 25.5 million passengers (16.5 million of them international). For reference, consider that the combined number of passengers handled by the airports in Guadalajara (GDL) and Monterrey (MTY) totaled 26.0 million the same year.

The World Travel & Tourism Council (WTTC) estimates that in 2018 46.8% Cancún’s GDP was directly related to travel and tourism. Among large cities dependent on travel and tourism, Cancún ranked only below Macau (50.3%) and above Marrakesh (30.6%) and Las Vegas (27.4%).

With the COVID-19 pandemic wreaking havoc on travel and tourism (passenger traffic for the months of April and May at CUN is down 97.4% from last year), the 1.7 million inhabitants of the state of Quintana Roo, where Cancún and the Mayan Riviera are located, are facing very serious economic hardship.

Categories
Economy

Something is Rotten in the Mexican Economy

Hourly Compensation Costs in Manufacturing

Since NAFTA went into effect, Mexico’s favorable trade balance in manufactured goods with the US and Canada has ballooned. In the 25 years spanning 1993 to 2018, the country’s manufacturing surplus with its trading bloc partners went from 0.3 to 166.7 billion USD.

Over the same period of time, however, Mexico has only managed to grow its GDP per capita at a meager 1% annually.

Post-NAFTA, wages have barely improved in spite of the country “exporting” surplus labor in the form of 4.1 million unauthorized immigrants to the US in the period between 1995 and 2007.

The decades-long pathetic record of development in Mexico demands an urgent and vigorous debate regarding the country’s political economy. A debate not unlike the one being urged upon the US polity by voices such at those of Bernie Sanders, Robert Reich and Gabriel Zucman.

Categories
Fiscal Policy

Regressive Fiscal Populism in Mexico

Motor Vehicles and Taxes

Tax revenue includes levies under the rubric of Impuesto sobre tenencia y uso de vehículos and Control vehicular

Lore has it, incorrectly so, that the tenencia tax levy on motor vehicle ownership was introduced in Mexico with the goal of financing the 1968 Olympic games and remained on the books for decades.

As of 2018, with car registrations reaching a historical high, a majority of Mexican households (51.3%) did not have a car or truck in their possession.

However, during the administration of President Felipe Calderón, a process was kicked-off whereby the fiscal burden on motor vehicle ownership in Mexico has substantially diminished.

In a country with serious problems of inequality, the demise of the tenencia (which is based on the asset’s value) is a very unfortunate development in fiscal policy. Taxes on motor vehicle ownership are sensible because they are fiscally progressive, efficiently collected and create appropriate incentives regarding decision-making in matters of urban development and environmental sustainability.

Categories
Fiscal Policy

Mexico, the Oligarch’s Dream

2017 Tax Revenue from Property

“Because we are talking about directly taking money away from people or putting money in people’s pockets, taxation is a place where we can most clearly see whether we have an establishment or an oligarchy.” – Thurow, Lester C. (1989), An Establishment or an Oligarchy?, National Tax Journal, 42:4, pp. 405-11

Categories
Fiscal Policy

Taxation of Real Property in Mexico

2018 Revenue from Impuesto Predial

Real property is very lightly and disparately taxed in Mexico.

Across the US, state and local governments collected a total of 526 billion USD in property taxes during 2017. This amount comes out to be 1,618 USD/capita and 2.7% relative to GDP.

In Mexico, property tax (impuesto predial) collected in 2018 totaled 49 billion MXN (~2.6 billion USD). The figure is equivalent to 394 MXN/capita (~21 USD/capita) and 0.2% relative to GDP.

Categories
COVID-19

Quo vadis in Mexico, COVID-19?

Transit Station Mobility

As the COVID-19 pandemic rapidly spreads across North America, Mexico has taken social distancing measures that have brought mobility down to levels resembling those of New York.

The future course of the pandemic, which is currently at the acceleration phase in Mexico, will critically depend on the country’s federal, state and local governments being capable agents in the spheres of public health and social welfare over the next few weeks.