The good, the bad and the violence
In 2014 Jesus Gonzalez catered mainly to Mexican shoppers at his high-end furniture store NIU Urban Living. Eighty percent of his clients consisted of people making a trek across the border to shop at his store, today that number is below 10 percent.
“We hit rock bottom,” Gonzalez said. “We have no control over this.”
In the past two fiscal years the City of McAllen has lost a total of $5 million in sales tax revenues, which stakeholders attribute to a lack of Mexican shoppers crossing over to make purchases. With another Black Friday approaching, business leaders are concerned the yield will continue to disappoint.
In McAllen, sales tax account for roughly 50 percent of the general fund. Earlier this year the city took several months to pay the UTRGV School of Medicine $1 million that was budgeted for the 2016-2017 fiscal year, citing the loss of sales tax revenues as one reason for the delayed funds.
At a panel discussion last week business and civic leaders discussed the current economic climate in the region.
Dr. Salvador Contreras, an economics professor at The University of Texas Rio Grande Valley and director of the Center of Border Economic Studies (CBEST), presented data comparing retail sales rates in Hidalgo county to other Texas border regions, overlaying the depreciation of the peso and the number of border crossings in each respective region.
Ultimately retail sales data alone cannot identify the nationality of a shopper, so there is no way to measure with certainty if and why Mexican nationals are deciding not to spend money in McAllen.
Contreras said there is no way of know through data the impact of Mexican shoppers in the region.
“In any given place locals consume and so do visitors,” he said. “So the problem trying to estimate how much those who are visiting are actually spending is hard to tell because sales are not exactly broken by the origin of the shopper.
Violence in Reynosa
The peso devaluation and negative rhetoric from Washington have been cited as reasons why Mexican nationals may not be choosing to visit the United States. However, the data Contreras presented showed a decrease in retail sales in Hidalgo county, while Cameron, Webb and El Paso counties remained steady, suggesting that the issue is specific to the McAllen area.
Owners of local businesses along with their managers say violence in Reynosa is deterring their customers from making the trip from Monterrey and other nearby cities.
Edward Lopez, general manager of the Double Tree Suites by Hilton said the violence has also resulted in a difficult two years for the hotel industry.
His hotel has hosted Mexican accountants for the past 26 years. This year those same accountants still visited but nearly half of them drove through Laredo steering clear of Reynosa and making their travel time three hours longer.
“It has been very difficult and we do not see an end in sight,” Lopez said. “It is the violence in Reynosa, period.”
Although seasons like these are not unheard of, previous trends seen in other border regions suggest that this sort of violence and the loss of sales comes in cycles. This means McAllen should be seeing those familiar Mexican shoppers at their stores in the coming years.
“Places like Juarez and Tijuana have experienced the same in the past and now they’re back to normal,” Gonzalez said. “We’re hoping that will be the case in Reynosa in the next year or so.”
But the problem continues and some fear shoppers might choose to shop in Laredo or even San Antonio instead of taking a longer route to McAllen. Because of this concern, other methods of transportation to McAllen, such as airfare, have been explored by the city. However, McAllen city manager, Roy Rodriguez said the idea isn’t promising.
“Many years ago there was a flight from here to Monterrey and it didn’t last,” he said, adding that in a recent meeting with Aeromar they noted a lack of ridership in the McAllen-Mexico City route.
“We feel confidant that right now, it’s just not going to make it,” he said.
A Regional Approach
During the panel everyone agreed taking a regional approach would be the most effective way to address the issue. However in recent talks about merging the three metropolitan planning organizations (MPO) Harlingen-San Benito, Brownsville and Hidalgo County some leaders like Brownsville mayor Tony Martinez have been vocally hesitant.
The merge could lead to an extra $100 million in federal transportation funds.
“Cities in the Valley are very competitive,” Rodriguez said. “We need to work together on transportation, tourism and things that benefit us all.”
Rodriguez said building a highway is not just going to benefit McAllen, it would benefit the Rio Grande Valley.
With the completion of the $50 million expansion at La Plaza Mall and several other construction projects underway the future looks bright for McAllen, despite the dip in retail sales.
Rodriguez and the city has been fortunate that while there has been a decline in sales tax, everything else revenue wise in the City of McAllen is healthy.
“Construction in that last couple of years has gone very well,” he said. “That tells us in part that there is confidence on this side to invest in McAllen.”
Finding More Solutions
While businesses have missed the Mexican shopper in Hidalgo County some tend to think collectively putting in more resources to attract previously neglected domestic tourism markets such as Winter Texans, ecotourism and sports tourism could be a method to compensate revenue.
Winter Texans attribute $750 million a year while ecotourism brings in $463 million.
Sports tourism obviously has huge potential. The two times professional soccer teams from Monterrey played at H-E-B Park, the events were sold out.
The renovation of La Plaza Mall has definitely helped as well. Leadership with the Simon property have witnessed their old clientele in stores.
With Black Friday approaching retail businesses hope to see more Mexican shoppers in their respective stores. McAllen Mayor Jim Darling will keep his fingers crossed.
“We're still connected and hopefully we'll see a big day Friday,” Darling said. “Hopefully we'll see friends we haven't seen for awhile because it is important to us.”