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Torn Between Higher Taxes and Border Hassles

Local government officials are eyeing extra revenue from Mexicans crossing the Rio Grande to save on items after a sales tax increase in Mexico's border regions. But cross-border traffic could deter some of the potential customers.

Two women carry goods as they walk to the Paso del Norte International Bridge between the El Paso-Ciudad Juárez border on Jan. 10, 2014, in El Paso.

LAREDO — Braving the unusually cold temperatures one recent afternoon, Aurelia Alcantar crossed the Puente de las Américas international bridge from Mexico into this South Texas town. She was going shopping, and crossing the border let her avoid a recent tax increase in her hometown, Nuevo Laredo, Tamaulipas.

The shopping trip required Alcantar, 71, to travel by bus first and then on foot. Despite any potential savings, she said, gaining entry into Texas could be enough of a deterrent to keep her money in Mexico, where she would be forced to make do with less.

“It’s going to be hard,” she said, shielding her weathered face from the wind as she crossed back into Mexico. “And the lines —  the lines are exhausting. They should let us older people pass first. The problem isn’t going back; the problem is getting here.”

As part of President Enrique Peña Nieto’s economic reforms in Mexico, the federal value-added tax in regions within about 12.5 miles of the border was raised this year to 16 percent from 11 percent, matching the rest of the country.

As a result, economists and local government officials in Texas are eyeing millions in additional dollars being spent by Mexican residents who are willing to cross the Rio Grande to save on items from toilet paper to electronics.

“When something negative happens for somebody, something positive happens for somebody else, lamentably so,” said Carlos Villarreal, the city manager of Laredo. “That’s reality. Obviously, we’re going to be monitoring that very closely.”

But until U.S. Customs and Border Protection puts additional resources in place to improve cross-border traffic, leaders and business owners say, what should be a boon could be little more than a bump.

“I think it all depends on what goes on at the bridges and how long it takes to process people,” said Les Norton, a store owner and president of the Laredo Downtown Merchants Association. “It’s so frustrating when you’re dealing with these bureaucrats who look at Laredo and think every person coming from Mexico is either a terrorist or smuggling drugs.”

Wait times at the border can be several hours, and pedestrians and drivers often see closed lanes despite growing traffic. Travelers can also be delayed by lengthy inquiries from inspectors.

Complaints about understaffing and wait times at border crossings have been common since the creation in 2002 of the Department of Homeland Security, which oversees CBP and the U.S. Border Patrol. But the potential new revenue has spotlighted just how underserved the borders are, regional leaders say.

“For this being a great country that it is, we shouldn’t be welcoming people the way we are right now,” Villarreal, said. Only portable toilets are available at the border, he said, “and when it gets really hot, can you imagine old ladies and kids not having a place to go to the bathroom? This is not the way it should be.”

Federal officials have pointed to a recent agreement on a public-private initiative as just one example of Customs and Border Protection’s efforts to address the bottlenecks at American checkpoints. Through the project, local governments enter partnerships that provide money to Customs and Border Protection for additional inspectors at major border entry points. The program is still in its planning stages, but the goal is to pay for additional agents during peak wait times.

“The utilization of public-private partnerships is an important component of CBP’s strategy to optimize resources,” Thomas S. Winkowski, the department’s acting commissioner, said in December. “Together with our private sector partners, we can better facilitate trade and travel to continue to grow our local and national economies.”

The initial phase of the program will finance only overtime, but Villarreal said that the help should come predominantly from the federal government and that contributing money for border crossings was not necessarily something the city would make a regular practice.

“We’re not that rich to the point where we can say our resources are unlimited,” he said. “I am taking a wait-and-see attitude. Normally we work very well with CBP.”

Relief may also come by way of a federal appropriations bill that includes funding for 2,000 additional CBP officers. U.S. Rep. Henry Cuellar, D-Laredo, said the agents would be hired over the next two years, though it is unclear how the resources will be spread out across the country.

About 700 miles upriver in El Paso and Ciudad Juárez, economists expect the American side to gain about $55 million a year in retail sales as a result of the changes in Mexico. But some advocates there say the tax increase will hurt the region in the long term.

U.S. Rep. Beto O’Rourke, D-El Paso, said the region could suffer if stakeholders did not look at the binational community as one economy.

“Moving sales and spending from one side of the border to another really does nothing to help the whole system,” O’Rourke said. “And over time it could really threaten the competitiveness of the El Paso-Juárez and the U.S.-Mexico border region.”

He said he met recently with Carlos Angulo Parra, a Mexican congressman and National Action Party member who represents Ciudad Juárez. Angulo has filed a lawsuit to stop the tax increase and threatened a labor strike in September.

“I hope that there is some way — even after it has gone into effect — to pull back from this,” O’Rourke said. “Perhaps it will take some evidence that this had been harmful not just to the northern Mexican economy but the Mexican economy as a whole.”

Christopher Wilson, an associate at the Woodrow Wilson International Center for Scholars’ Mexico Institute who specializes in the North American Free Trade Agreement and the border economy, said there would be a definite impact, though to what extent was not clear.

“Right now it’s actually in the news,” he said of the higher tax. “In the border region, everyone is talking about it, and these are not policy people. So that visibility is one reason I suspect there will be a fairly quick impact, if there is much of one.”

Unlike O’Rourke, Wilson thinks the impact to El Paso and the rest of the northern border will be long-lasting, but that is the only certainty.

“I think to a certain degree it will actually change shopping patterns, but I don’t know what that degree is,” he said. “I think it’s pretty possible that it will be pretty small. We have problems at the border.

“The border is not as fluid as it once was for legal and positive things, for regular people who do things like cross the border to go shopping or visit family or go to work.”

Wilson also emphasized that Mexico had a strong argument for making the change, despite the backlash.

“The structure where there are multiple tax rates in different parts of the country has been used for tax fraud,” he said. “Companies essentially transfer some of their sales to the border region as a way to not pay their taxes, and so that’s an issue that needed to be dealt with.”

“Whether or not the cost outweighs the benefit, I’m not going to say,” he added. “That’s a tough question.”

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