In a letter to President Trump, Mexico’s president-elect has unveiled an ambitious infrastructure and economic development plan, as part of a pledge to reduce migration of Mexicans to the United States.
“The most essential purpose of my government will be to ensure that Mexicans do not have to migrate because of poverty or violence,” Andres Manuel Lopez Obrador said in a letter, sent to Trump earlier this month but only recently made public by Obrador’s transition team.
“We will try to make emigration optional and not necessary,” wrote the Marxist president-elect, promising “the greatest effort ever undertaken in Mexico” to create jobs and reduce crime.
Central Americans now outnumber Mexicans in illegal crossings of the U.S. border. But a GAO report found that 45,272 Mexicans overstayed their visas in 2015, and concluded that 42,114 of those were suspected of still being in the country.
Trump responded with his own letter, a Spanish translation of which was read by foreign secretary designate Marcelo Ebrard at press conference in Mexico City this week.
“We welcome legal immigrants from around the world but we can’t accept illegal immigration,” the letter from Trump said, according to Ebrard.
“We are ready to take up the theme of economic development as well as security relations as well as Central American migration,” Trump wrote.
Neither letter mentioned Trump’s campaign promise to get Mexico to pay for a wall along the U.S.-Mexico border.
“We haven’t spoken about the issue of the wall,” Ebrard said in response to reporters’ questions.
Experts questioned whether the new government, due to take office in December, will be able to dedicate the necessary funds to carry out Obrador’s development plans, CNS News reports.
“I guess the big question is, can all of it square with keeping the fiscal deficit from ballooning way up?” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.
“It has to be funded outside of any U.S. government contribution,” Hufbauer said, noting the Trump administration’s stated policy of reining in foreign assistance spending.
Mexico’s deficit is running between 47 and 48 percent of GDP, according to Christopher Wilson, deputy director of the Mexico Institute at the Wilson Center, who called it a “reasonable level.”
But Obrador has said he will not to raise taxes, while promising to cut taxes in free trade zones which he is proposing to establish in the country’s north and south.
“That sounds like an impossible combination to me,” Wilson said.
The entire collection of economic development proposals Wilson said represent “a financial commitment that Mexico is not in a position to make, given its finances.”
“Basically I think Mexico is going to have to keep its overall debt level where it is today,” he said. “[Obrador] might be able to raise it a couple of percentage points without raising alarm bells, but there is not a lot of space to grow the debt without concerning the markets.”
The development proposals include creation of a free-trade zone along the U.S.-Mexico border extending 12.5 miles into Mexico.
Obrador proposes to cut the Mexican VAT or sales tax by approximately half within that zone, to match sales tax rates in contiguous states in the U.S.
He is also proposing to reduce income tax in the free trade zone.
“That makes a lot of sense,” said Hufbauer noting a lower tax rate would nearly match lower tax rates in the U.S. resulting from Trump’s tax cuts.
Obrador has also promised to double the minimum wage within the zone, which he said in his letter to Trump would be a final barrier to “retain workers within our country.”
The development plans also call for the creation of a free trade zone in what is known as the Isthmus of Tehuantepec, in southern Mexico.
The isthmus offers the shortest distance in Mexico between the Pacific and Gulf of Mexico coasts, and was a major goods transit route before the opening of the Panama Canal.
“It is a 300-kilometer corridor, where a railway line will be built to transport containers,” Obrador explained in the letter. “The existing road will be expanded, the ports of Salina Cruz [on the Pacific] and Coatzacoalcos [on the Gulf of Mexico] will be rehabilitated.”
During his campaign, Obrador vowed to build a high-speed rail line along Mexico’s Caribbean coast, a key tourism area.
James E Windsor, Overpasses News Desk
July 27th, 2018