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Mexican shoppers head to Texas to avoid higher tax

4:18 PM, Nov 30, 2013   |    comments
Jason Whitlock carries a 32-inch TV and an advertising supplement at a Best Buy store in Austin, shortly after it opened for Black Friday sales at midnight on Nov. 23, 2012. (Photo: Jay Janner, AP)
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SAN MARCOS, Texas - Texas retailers are getting an early Christmas gift this year from their southern neighbor: swarms of eager Mexican shoppers.

A recent sales tax hike in Mexico's northern region has been sending Mexican citizens north of the border - in cars, planes and tour buses - for their Christmas shopping. The shoppers - looking to save money and score on the latest brand names of TVs, toys and clothing - are arriving by the busload from as far away as Mexico City and Jalisco to outlet centers and malls across Texas, said Pete Garcia, executive director of the South Texas chapter of the United States-Mexico Chamber of Commerce.

"It will be a huge benefit for all of South Texas, from the border of El Paso to McAllen all the way up to San Antonio, San Marcos and Houston," he said. "You're going to see a significant jump in those shoppers."

Mexican lawmakers in October raised the sales tax in the country's northern region from 11% to 16% - or twice the rate in most Texas municipalities, said Tom Fullerton, professor of economics and finance at the University of Texas-El Paso. Mexico's northern region had enjoyed a lower rate for decades to compete with U.S. retailers across the border, but the tax was raised to equal the rest of the country as part of nationwide tax reforms, he said. Texas' statewide sales tax is 6.25%, but municipalities can raise that another 2 percentage points.

Mexican residents typically account for around $4.5 billion in retail sales in Texas counties along the Mexican border, Fullerton said. That number is expected to jump by $225 million due to the new tax hike, with retailers as far inland as Houston and San Antonio reaping the benefits, he said.

Even though the tax increase doesn't go into effect until January, the bad publicity the measure received in Mexico is driving shoppers across the border early for their Christmas shopping, Fullerton said.

"This was a very controversial bill in Mexico," he said. "There will be a lot of customers who will be shopping across the border even before the actual tax occurs."

At the Tanger Outlets in San Marcos on Saturday, white passenger buses with Mexican plates pulled up to the curb and dislodged clusters of Spanish-speaking passengers who headed straight to Old Navy, Calvin Klein, Banana Republic and other stores. The parking lot resembled a lot in Guadalajara or Monterrey, crowded with cars with license plates from Coahula, Nuevo Leon, Jalisco, Tamaulipas and Ciudad Mexico.

Ernesto Rangel, 45, drove the 14 hours from Mexico City to San Marcos to get the latest models in electronics and clothing, do some Christmas shopping - and avoid the higher sales tax.

"It's cheaper, and we find things you can't find in Mexico," he said as he positioned a new Phillips surround sound system in the trunk of his car. "I can do all my Christmas shopping here."

Mexican residents make up such a significant part of the outlet center's sales that management recently printed off promotional posters and brochures in Spanish and plastered them around the sprawling center, said John Lairsen, the outlet center's general manager. "I'll assume we'll continue to see that increase" with the new tax hike, he said.

Outside, one of the large white passenger vans contained the family of Carlos Gomez, 54, of Jalisco, Mexico. Gomez was leading his extended family - 28 people from five families - on a shopping and sightseeing tour that included stops in San Antonio, Houston and San Marcos. The caravan drove from Jalisco, past the malls in northern Mexico and straight to the outlet center in San Marcos, where they hoped to stock up on designer clothes, electronic toys and TVs.

Having so many shops in one place makes it worth the trip, he said.

"We do it for the convenience and for the sales," Gomez said. "Plus, we make a vacation out of it."


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