I often am speaking and explaining to new investors the favorable business environment that exists in Mexico, in comparison to other emerging countries, so when I ran across this news, I felt it a good subject to share with our readers and how it effects the Mexico Real Estate market.
MEXICO S TRADING ZONES
Mexico is currently a partner in one of the largest trade agreements of the world. The North American Free Trade Agreement. This includes the countries of Canada, USA, and Mexico. Basically nearly 97% of all goods and services produced or generated from either of these countries pays 0% duties if traded to another member of this trade agreement. If the country does not belong to this pact, duties are still applied.
MEXICO S REDUCTION ON TARIFFS FOR NON-NAFTA COUNTRIES
Mexico s Federal Secretary of Economy recently announced in the Offical Publication that Quintana Roo will be classified as aBORDER REGION andBORDER STRIP for the next five years. Currently the states of Baja California North and Baja California South are in these regions which allows for preferential tariffs on various products imported into Mexico and these Mexican states. The proactive actions were initiated to prepare and to impulse sales of products in the tourist sectors of the economy.
With this decree approved on a federal level, the tourist industry has a very competitive edge with other tourist destinations of the Caribbean ocean and other countries competing for world tourism. This new classification of theseBORDER REGIONS will have effect until 31 of December of the year 2013. The goal of this legislation is to simplify the importation process as well as to decrease the over all prices to the final consumer who are considered to be visiting Mexican foreign tourists within these targeted regions.
The program includes 1,342 products whose new tariffs will be reduced to zero and another 393 products whose tariffs will be reduced to five percent. It is estimated that there are approximately 850 companies in Quintana Roo alone that will benefit from this reduction of tariffs. The new regulation has been designed to assist the continued growth of the tourist industry of Mexico as it is this sector that leaders project to be the future most important revenue generator of this economy.
The states that are included in theBORDER REGIONS are the states of Baja California North, Baja California South, Quintana Roo, A partial region of the state of Sonora. The areas that are included in theBORDER STRIPS include those areas neighboring Guatamala, municipality of Caborca of Sonora, Comitan de Dominguez of Chiapas, Salina Cruz of Oaxaca, Tenosique of Tabasco.
(Source: Por Eso! of Quintana Roo)
Many of these 1,300 products have been paying import tariffs since 1993 from 20% upto 35%. The new regulation will go into affect immediately beginning in January of 2009. The decree was established in the National Plan of Development 2007-2012 which establishes national objectives, including the support of creating a competitive economy that offers improvements on prices based on increased productivity and the creation of jobs.
With the reduction of taxes and increase in business activity in specific geographical sectors of a country, will by theory increase and create new jobs. With increase in new positions, more families will be moving to the region creating an increase demand on properties. The question is which products and services will this new decree regulate, and how much rotation and revenue do such products currently generate to justify businesses to expand and create such new jobs. Regardless, any regulations that promote the private sectors and governments cooperation to become more competitive in the world market, is always a step in the right direction.
Thomas Lloyd graduated from Purdue University Krannert School of Management with a degree in Management/Financial Option Investments. He has been living, investing, and working professionally in Mexico for over 15 years. With Mexican Real Estate Certificatons and various diplomas he is the current president of TOPmexicorealestate, you can contact him at (512) 879-6546 or through the company's web site www.TOPmexicorealestate.com