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Mexico extends tax cuts to the southern border to relaunch the economy

2020-11-29T03:39:57.350Z

The López Obrador government turns Chetumal into a free zone and extends the incentives of the northern border until 2024



Several rafts transport passengers and goods across the Suchiate River between Mexico and Guatemala.Rebecca Blackwell

The Mexican government will extend the tax cuts, which already existed in the border area with the United States, to the southern border.

As of January 2021, VAT will go from 16% to 8% and income tax (ISR), from 30% to 20%.

The municipality of Chetumal, in Quintana Roo, will also be a free zone.

In the northern border, the existing stimuli extend until 2024. The Executive of Andrés Manuel López Obrador, allergic to fiscal adjustments, has made this decision to relaunch the economy of this part of the country, which faces historical delays and is immersed in a additional crisis due to the coronavirus pandemic.

The beneficiaries are 22 municipalities in the states of Chiapas, Tabasco and Campeche that border Guatemala.

Chetumal, which borders Belize, will receive a different treatment.

In addition to applying the reduction in VAT and ISR and incentives to gasoline taxes, common to the rest of the border municipalities, it will enjoy exemptions from the import tax and the right of customs procedures.

This isolated area of ​​the country had a similar tax regime between 1934 and 1993, the year in which the Free Trade Agreement with the United States and Canada was approved.

During that period, imports were exempt from paying tariffs.

"There is a historical aspiration of longing for the people of Chetumal to return to what was the engine of their economy for many years," said the Secretary of the Treasury, Arturo Herrera, during the morning conference.

The economist José Luis de la Cruz clarifies the impact that these measures can have.

“It can generate incentives so that companies that are already established in that region can keep operating after a deep crisis.

The reduction of the tax burden can alleviate the present situation and allow a reactivation in the following years.

In the short term, I don't think they will create incentives to move more companies to the region.

That requires other elements such as security, infrastructure, energy ... ”, he highlights.

Since the electoral campaign, López Obrador has focused on the development of the southeast, the poorest area of ​​the country.

On the southern border, two out of every three Mexicans live in poverty, compared to the national average of 43%.

"There had to be some mechanism to help trigger economic activity, which would be complementary to programs and investments that the Government is already making in the area of ​​the peninsula," Herrera stressed.

The Administration has launched projects such as the Mayan Train and the Sembrando Vida program, which gives support to farmers in exchange for planting trees.

As for the 3,180 kilometers of border with the United States, the Government extends a measure that it signed two years ago, after coming to power.

To encourage investment, which had been in decline for months, the Executive decided to start applying reductions to VAT, ISR and incentives to the gasoline tax.

The stimuli were accompanied by significant increases to the minimum wage for workers in the area, where the maquiladora industry is concentrated.

The government's fiscal announcements for both borders contrast with the rejection of fiscal stimuli in other areas.

López Obrador has flatly refused to reduce or waive corporate taxes in the face of the hit of the crisis, which sank the economy by 17% in the second quarter of the year.

SMEs have had to settle for the offer of microcredits at soft rates, although many have been reluctant to incur debt at such a delicate time.

Source: elparis

All news articles on 2020-11-29

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