15-percent tax proposal signals end of Fox's ‘honeymoon,' angers citizens

June 05, 2001|By ARTURO BOJORQUEZ, Staff Writer

Mexican President Vicente Fox won the presidency almost a year ago.

After a small "honeymoon" period he made a proposal to increase taxes.

The honeymoon was over.

The measure has brought many complaints from Mexican citizens. They are against a 15-percent tax on groceries and medicines included in Fox's fiscal reform package presented to Congress a few weeks ago.

Some polls indicate many of those who voted for Fox wouldn't have done so if they knew he would propose a tax increase.

In Mexicali such complaints come from opposition parties, local politicians, citizens in general, and, of course, businessmen.

Fernando Reyes Rubio, recently re-elected president of Mexicali's Chamber of Commerce, said Fox's proposal to tax food and drugs will "increase prices and will raise the inflationary level."


Meetings with Mexican senators Jeffrey Jones and Roberto Pérez de Alba two weeks ago led local businessmen to reach an initial agreement that federal officials would keep taxes to 10 percent in areas within seven miles of the border, with the exception of San Felipe and Ensenada, to which the 10-percent limit would be extended despite those cities being well beyond seven miles into Mexico. Chambers of commerce statewide had asked that those cities be included.

The minimum daily wage in Baja California is $3.25 in U.S. dollars, so a 15-percent increase on such items will hurt consumers.

"This tax will be stronger in groceries and will affect primarily our workers, who are at the same time our customers," said Reyes Rubio.

The Entrepreneurial Coordinator Council, which represents seven other organizations (including the chamber) along with Baja California Gov. Alejandro González Alcocer, are taking the message about the local economic disaster the tax would create to federal officials.

One of these federal officials now working for the tax-opposition forces is Ernesto Ruffo Appel, the former Baja California governor who is presidential commissioner on border issues.

"We have to keep our border region competitive with the rest of our areas, even the United States," said Ruffo during his most recent visit to the Imperial Valley.

Ruffo said during a press conference last month in Mexicali's City Hall that he will bring all complaints to Fox and seek a change in the proposal.

Fox's increase in the added value tax would be used to develop programs for the 40 million poor people in Mexico.

"We will return it to this families ‘completito y copeteado (complete and fulfilled),'" Fox said to Mexicans in slang to make it more comprehensible.

Critics have said the proposal is only populism.

While many cities in southern Mexico will have the same tax, the border region, particularly Mexicali, will be more affected because, according to Reyes Rubio, local businesses have to compete with Calexico stores.

Besides the import tax (of around 30 percent), businesses have to deal with a bureaucracy that creates many obstacles.

Importers, for example, have to register in a federal system and their registration often is erased by errors by government officials.

"To get back to the system, one has to wait until federal workers in Mexico City put you on the list, and it takes between one week and one month and a half," said Reyes Rubio.

With some limits on imports and a sales tax of 8.5 percent, many Mexicali residents, or "Cachanillas," prefer to buy groceries and other commodities on the U.S. side of the border.

"There is no doubt Imperial Valley is a great competitor," said Reyes Rubio, who owns a pest control business.

Hildy Carrillo-Rivera, Calexico Chamber of Commerce executive director, said most Americans who cross the border to buy medicines will find them cheaper on the American side.

"They will not only lose these customers but also more Mexicans will come to buy here. This is something bad from President Fox," said Carrillo-Rivera.

The fiscal reform package proposed by Fox has to be approved by Congress before the next budget deadline of Dec. 31.

Staff Writer Arturo Bojorquez can be reached at 337-3451.

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