Boost coming?
San Luis R.C. awaits benefits of fiscal stimulus policy
SAN LUIS RIO COLORADO, Son. — Residents here say an economic stimulus program Mexico’s new president has launched in the border cities has yet to have an effect on their pocketbooks.
The fiscal package took effect Jan. 1, slashing sales, income and business tax rates and placing a ceiling on fuel prices at the pump.
Government officials and tax specialists in San Luis Rio Colorado say the benefits of the new policies only need time to be felt.
Under the program unveiled late last year by President Andres Manuel Lopez Obrador, the value-added tax, or consumer sales tax, has been halved, from 16 to 8 percent in Mexican border cities.
Income and business tax rates have been slashed from 30 to 20 percent for 43 municipalities in the border region, including San Luis Rio Colorado.
The package also is aimed at bringing gasoline prices in line with those at the pump on the U.S. side, but residents of the San Luis Rio Colorado say they have yet to see much difference.
“I saw that prices were different at the gasoline stations, but I don’t see that they have gone down that much,” said Norma Esparza. “I don’t think that they have gone down to the same price as on the other side, and that was what was promised.”
Magna, the Mexican equivalent of regular gas, cost 14 pesos (73 cents) per liter at the beginning of last week, but exceeded 15 pesos by Wednesday — well above the prices for a comparable amount of regular sold in the Yuma area.
Estela Jimenez, interviewed as she was leaving a grocery store near downtown San Luis Rio Colorado, said she had yet to see a generalized reduction in prices for goods.
“I saw some products that were cheaper than last year, but not all. Overall I think that I bought nearly the same as I did the year before with the same money.”
Small business owners such as Amalia Zalazar likewise said prices largely are unchanged.
“In the case of gasoline, I’ve noticed that they continue giving me the same amount for the same money,” she said. “I don’t see that this is saving me money.”
And the reduction in the value-added tax, she added, has not affected the prices wholesalers charge her. In fact, she said, prices for some items, such as for some brands of refreshments, went up at the start of the year, meaning she could not pass along a reduction to her customers.
Raul Fuentes Ovando, an accountant in San Luis Rio Colorado who specializes in tax matters, said the benefits of the stimulus package will take time to be felt on the border.
“What is happening is that it is optional for businesses to take advantage of the (value-added tax) stimulus,” he said. “It’s not obligatory. They have to register for (the program) and it requires some adjustments that take time.”
As more businesses opt into the program, more consumers will see benefits, he said.
In 2014, the value-added tax for the border region jumped from 10 to 16 percent. This year’s reduction decreed by Lopez Obrador is aimed at making stores in the Mexican side more competitive with those on the U.S. side.
Fuentes Ovando believes that the reduction in income and corporate tax rates can also help businesses in the Mexican border cities grow and become more competitive.
Nonetheless, “whether all those incentives are effective has a lot to do with domestic productivity (in Mexico), because they were designed with the idea of standardizing taxes and prices with those in the United States.”
The minimum wage for the border region also doubled at the start of the year to 176.72 pesos a day, or about 9.24 U.S. dollars at the current exchange rate. But many businesses in San Luis Rio Colorado already have been paying above the new rate.
“I believe that there will be many benefits for that reason, but we have to be realistic,” San Luis Rio Colorado Mayor Santos Gonzalez said. “Almost all the businesses pay more than double the (new) minimum wage rate.”
Like Fuentes Ovando, Gonzalez believes that benefits of Lopez Obrador’s stimulus package will be felt over the long term.
He was particularly hopeful about the reduction in business taxes. “Above all, I see it bringing about a greater ability among (businesses) to retain workers, which in the end benefits all of us with more employment and a better economy.”