How A Weak Peso Hurts Texas Border Cities

If you’re a small business owner along the border, a strong dollar means a very weak peso, hitting Texas right where it hurts.

By Brenda SalinasMarch 17, 2015 6:24 pm|

The rising dollar means Texas towns along the border may start feeling the hurt of fewer consumers. Tom Fullerton, a business professor at the University of Texas in El Paso, says that while the product incentive is still there for Mexican consumers, the economics say it’s not worth it.

“They come over and purchase a wide array of goods and services in part because, in Mexico, ‘Made In The U.S.A.’ has a great reputation,” Fullerton says. “And so in border cities like Laredo, El Paso, or McAllen or Brownsville, people will come across and they will buy gasoline, they will buy groceries, they will buy furniture, they’ll go to the movies, just about anything that a normal Texan consumer will purchase, Mexicans consumers will also purchase.”

In border towns like McAllen, Mexican consumers contribute almost $2 billion to the Texas economy through retail purchases.

“Probably the border metropolitan area that’s going to be hardest hit will be Laredo because about 50 percent of all retail sales in Laredo are to residents from Mexico,” Fullerton says. “That’s because Laredo itself is relatively small and it’s only an hour and a half north of Monterrey which is the third-largest metropolitan economy in Mexico. And so Laredo always gets hammered to a more severe extent than do the other border cities simply because of it has a largest percentage of its retail sales to our neighbor in the south. ”

Fullerton says the devaluation of the peso – primarily stemming from internal political troubles in Mexico City – has also had a negative impact on Mexican consumerism in Texas.

“The peso has devalued approximately 10 percent since last November,” Fullerton says. “That means that in a very short period of time that $75 shirt is now going to cost a customer from Mexico about $82.50. For that much of a price change in less than six months that is a type of price fluctuation that when it covers all goods and services can really take a bite out of household budgets.”

Fullerton says experts predict the peso will regain some of its lost value over the next half-year.