While President Donald Trump and top Democratic lawmakers struggle over the government shutdown, because of disagreements over the proposed southern border wall, newly elected Mexican President Andrés Manuel López Obrador, or AMLO, is taking a different tack when it comes to the border region. He recently proposed the so-called Tax Incentive Decree for the Northern Border Region, which reduces taxes for those living near Mexico’s northern border, and doubles the minimum wage. AMLO argues it incentivizes would-be migrants to stay in Mexico.
Raymond Robertson, professor of economics and government at the Bush School of Government and Public Service at Texas A&M University, says Mexico has had similar incentives since the 1970s.
“In 1972, they set up these special economic zones along the border for the very same reason: to try and encourage would-be migrants to stay within Mexico – and it had some degree of success,” Robertson says.
He says those programs went away when NAFTA came along in the 1990s.
“[It] opened up that special economic zone to the rest of the country, but most of the economic investment still remains in the northern border region,” Robertson says.
While the new USMCA trade agreement may have played some role, Robertson says the tax-incentive zone likely came about as part of AMLO’s overall economic policy.
“He’s been very aggressive about implementing new economic policies,” Robertson says.
But he also says the tax incentive isn’t much different than what his predecessors have done.
The program is meant to help workers and businesses, Robertson says.
“The minimum wage will be doubling to about $9 a day … but it also contains a lot of incentives for businesses. Specifically the business income tax would also be reduced for workers and businesses that are producing in the border region,” Robertson says.
In theory, the program would attract migrants who’ve made their way northward through Mexico to stay and work in the border region. But Robertson says many of Mexico’s own citizens have been leaving that area for years to come to the U.S.
He says the tax-incentives might not do much to help migrants from Central America. Robertson says those people are generally looking for asylum and want to come to the U.S., either to re-unite with family members or to earn an even higher wage.
“Their goal is not to stay in Mexico, and it’s unlikely that they would be taking advantage of this particular initiative,” Robertson says.
In Mexico, Robertson says there will likely be mixed reactions. That’s because, for one thing, the border region already has the highest wages in the country.
“Doubling the minimum wage in the boder region might actually increase the disparity in earnings across the country,” Robertson says.
He also says there could be pushback from Mexicans because the tax incentives could reduce the Mexican government’s income by about $6 billion.
Robertson says the U.S. government has commented little on this because of the government shutdown.
Written by Caroline Covington.