Thread: REGION: Falling peso drags down local merchants

REGION: Falling peso drags down local merchants

Less spending by Mexicans could worsen the county's economy
By EDWARD SIFUENTES - Staff Writer | Saturday, March 21, 2009 7:07 PM PDT ∞

Since August, the peso has lost about a third of its value and that means Mexican shoppers are spending less when they visit the United States. (Photo by Don Boomer - staff photographer) The weakening Mexican peso could mean fewer people are coming north from Tijuana to buy flat-screen TVs, designer clothes and household goods, economists and local business leaders say.

Since August, the peso has lost about a third of its value ---- from about 10 pesos per dollar to 15 pesos per dollar. That means that Mexican shoppers, who frequently exchange pesos for dollars to shop in San Diego County, have seen their spending power diminish because they are able to buy fewer dollars with their money.

"It definitely has reduced Mexican citizens' spending power here," said Marney Cox, chief economist for the San Diego Association of Governments, the region's chief planning agency.

For example, a Mexican shopper who purchased a $400 TV last summer spent about 4,000 pesos; now he would spend about 6,000 pesos, the equivalent of a $200 price increase.

Jim Gerber, a professor of economics at San Diego State University, said that a drop in the value of the peso could mean a reduction in the county's already falling sales tax revenue.

Retail sales in the county are forecast to fall from $34 billion in 2007 to $32 billion in 2009, according to the San Diego Institute for Policy research, a local economic and policy think tank at National University.

Declining sales tax revenue for the county and cities in the region could mean fewer services for their residents.

The devaluation of the peso is the latest in a series of problems local businesses are facing in attracting shoppers from neighboring Tijuana; long border waits, increased scrutiny at the border and Mexico's dwindling economy also are contributing to lower sales, business leaders say.

"The sad truth is that border waits have already killed off most of our casual shoppers," said Jason Wells, executive director of the San Ysidro Chamber of Commerce.

Wells said business in the South Bay is about half of what it was last year, due largely to the slumping economy and long lines at the border, Wells said. The devaluation of the peso may have some effect on spending habits, but it is likely negligible, he said.

Although fewer Americans are traveling to Mexico because of concerns about crime, Wells said now is a good time to go south of the border because of the strength of the dollar.

However, to stimulate the economy on this side of the border, the federal government must reduce wait times at the border, Wells said.

Delays at U.S.-Mexico border crossings in San Diego County were estimated to cost the U.S. economy about $3.74 billion in lost sales, jobs and productivity in 2005, according to a 2006 study released by the San Diego Association of Governments and the California Department of Transportation.

It is unclear exactly how much Mexican shoppers spend in San Diego County, but thousands of Mexican residents often travel to South Bay cities each day looking for bargains on clothes, electronics and household items.

In its 2006 study, the San Diego Association of Governments estimated that Mexicans spent about $6 billion in San Diego County, nearly 4 percent of all economic activity in the region, which is more than $160 billion a year.

The study included a survey asking people crossing the border about their travel.

Of the 3,754 people questioned in the survey, 70 percent of them said they lived in Mexico.

The survey reported that 63 percent of Mexican residents questioned said they were crossing the border into the U.S. to shop. About 80 percent of Mexican residents questioned said they were going to the City of San Diego or South Bay cities. Only about 5 percent of them said they were going to "other parts of the county."

North County was not reported as a destination in the survey results, but may have been lumped in with "other parts of the county."

"The impacts are strongest near the border," SDSU's Gerber said. "As one moves north, they weaken as shoppers from Mexico drive farther north. There are Mexican shoppers in North County, but a lot of them earn dollars, not pesos."

The devaluation of the peso has been attributed by some economists in part to America's slumping economy, because Mexico depends heavily on the U.S. to buy its exports. The struggling economy here also has hurt Mexican workers in the U.S. who are sending less money to their families at home.

Contact staff writer Edward Sifuentes at (760) 740-3511 or esifuentes@nctimes.com.

http://www.nctimes.com/articles/2009/03 ... 6e815a.txt

It also means that mexican fruit and veggies are cheaper soo buy a mango