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Another 'Trump effect': commerce drops by up to 30 percent in small U.S. border cities

U.S. cities are suffering because of the drop in the purchasing power of the Mexican peso, which wobbles every time Trump talks about NAFTA or Mexico.
8 May 2017 – 02:02 PM EDT
A man walks by closed shops in Calexico, California, after crossing the border with Mexico. Crédito: Getty

Donald Trump boasts that his tough immigration policies have led to a steep plunge in the number of undocumented migrants crossing the border with Mexico. But he's said nothing about one unintended side-effect: a drop in the purchasing power of Mexicans who shop daily in U.S. border towns.

Some of the small border cities that depend heavily on Mexican buyers have experienced a significant drop in commerce during the first three months of Trump's presidency, according to nearly 20 Univision interviews with businesspeople and government officials in the region.

Compared to the same period last year, sales dropped by about 15 percent in Calexico, California, with a population of about 40,000, as well as Douglas, Arizona, with just over 15,000 people, according to local officials. The small Arizona county of Santa Cruz, where Nogales is located, saw a 30 percent drop, according to the local Chamber of Commerce.

The key reason for the drop appears to be the shrinking value of the Mexican peso, which makes it more expensive for Mexicans to buy the home appliances, clothes and other goods they used to buy in the United States, where prices were cheaper.

Some Trump supporters along the border argue that the peso has fallen because of other problems, including the overall weakness of the Mexican economy. But there is a clear link between Trump and the falling peso: the Mexican currency plummeted the day Trump was elected president because of expectations that the Mexican economy would be negatively impacted.

The peso has recovered part of its value in recent weeks, but it remains vulnerable to Trump's statements, which cast a chill over investors and enterprises to the south.

“Maybe his policies and his rhetoric don't cause any damages in places like Tennessee, but he's killing us on the border,” said Calexico Mayor Armando Real. Up to 80,000 shoppers from Mexicali on the Mexican side cross the border to shop each day, doubling the city's population.

Fluctuations of the peso against the dollar thanks to Trump
Recent changes in the amount of pesos that equal a dollar.

Fear of Trump's tough immigration policies appears to have led to a drop in the number of undocumented migrants trying to cross the border. Detentions by Customs and Border Protection (CBP) agents dropped from more than 40,000 in the last full month of the Obama administration to just 12,193 in March.

But there's concern that Trump's harsh statements about Mexico and the NAFTA free trade agreement will cause irreparable damage to the border region, where 14 million people live along both sides of a line that many consider to be artificial. An estimated 1 million people cross the border each day to shop, work or relax in the neighboring country.

In cities like Douglas, for example, 70 percent of collected sales tax comes from Mexican buyers.

Some experts add that Trump's attacks on NAFTA have paralyzed investments in factories and service infrastructure.

“All this uncertainty puts many jobs at risk,” said Kenn Morris, president of the Crossborder Group, a company that tracks commerce between Mexico and the United States.

Though Mexican consumption in small U.S. border cities has dropped, the number of people, cars and trucks crossing the border has not dropped, according to figures for six border crossings provided by the CBP and other border officials interviewed for this report. The numbers in most categories remain stable or dropped by no more than 3 percent, according to sources.

That suggests that Mexicans along the border are continuing to shop in the United States but are spending less.

“People on the border don't see crossing into the United States as a vacation and they are not influenced by the image of the country,” said Christopher Wilson, a Mexico expert at the Woodrow Wilson International Center for Scholars in Washington. “Their decisions are conditioned by their wallets, by the dollars they can save at Target.”

The number of Mexican tourists arriving at U.S. airports does appear to have fallen somewhat. The demand for seats on flights from Mexico to the United States dropped by 2.5 percent in the first four months of the year compared to the same period in 2016, according to Hooper, a company that based its analysis on more than 10 billion internet searches for flights.

The drop in Mexican consumption has added to a string of problems faced by merchants along the border.

“More than 10 years ago commerce was already falling in Calexico. Truth be told, I've spent a lot of time trying to figure out the cause, and a good part of it is because people prefer to shop on the internet,” said Mark Holloway, manager of Sam Ellis, one of the largest stores in the California city.

Officials in the Texas border city of Laredo said their commerce started to shrink before Trump's election, because of the devaluations of the peso that started in 2014. Others in Douglas and Nogales said the long waiting lines at border crossings for the past several years may be partly responsible as well.

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“Our message to the government is that small border communities like Douglas need more attention. Our border entry point is antiquated, overloaded and congested,” said Mayor Robert Uribe.

Not all the border cities surveyed by Univision reported a negative impact from Trump's election.

“I was scared when Trump won, but everything is normal,” said Leticia Aragon, owner of the Bella Fashion shop in San Luis, Arizona, one of the first stores that Mexicans see when they cross the border from San Luis, Mexico. “I see that people need to buy, and they don't care who's in the government.”

Although the larger towns along the border tend to be more insulated economically, they also have felt the impact of Trump's election. San Isidro, the area of San Diego closest to the border, has experienced a 40 percent drop in sales at its duty free shops, according to one report.

In El Paso, commerce fell by about 15 percent compared to the previous year, said Richard Dayoub, president of the Greater El Paso Chamber of Commerce, which has about 1,600 members. The number was estimated by local officials, based on the drop in sales taxes collected.

Dayoub and others believe that some Mexicans are avoiding crossing to the United States because they don't feel welcome.

“This shows the impact that irresponsible words can have,” he complained. His city does up to $1.3 billion in sales to Mexicans from neighboring Ciudad Juarez each year. “We're not talking about small numbers. We're talking about giant numbers.”

In Arizona, Santa Cruz County Sheriff Tony Estrada criticizes Trump for the language he uses about Mexicans, which reminds him of former Gov. Jan Brewer.

"This man speaks badly of Mexicans and people take that into account," Estrada says.