Industrializing: the plan for Tehuantepec

The Isthmus of Tehuantepec, showing the area affected in white in the box on the right side of the graphic. The gray streak running through the white area is for the freight train. There are 11 indigenous and Afro-Mexican peoples in that area.

By: Susana González G.

The project to create seven Special Economic Zones (SEZ) launched in the last presidential term to impel the development of Mexico’s southeast will be formally buried with a presidential decree that the legal advisors of the federal Executive now analyze. Instead, a free zone with six industrial parks will be created along the Isthmus of Tehuantepec –which connects the ports of Salina Cruz, Oaxaca, with Coatzacoalcos, Veracruz–, one of the country’s regions most lagging behind [economically].

“The future of those zones is that their disappearance is going to be decreed,” pointed out Rafael Marin Mollinedo, the one responsible for the Program for the Development of the Isthmus of Tehuantepec and for the SEZs.

Instead of the SEZs the federal government projects a free zone, along the Isthmus of Tehuantepec, with six industrial parks of 500 hectares each, with fiscal incentives similar to those granted at the northern border (where starting this year taxes were reduced and wages increased) and located on ejido lands so that their property owners will obtain permanent benefits “and won’t just be watching as progress and development happen without being included,” the official stated in an interview with La Jornada.

“It’s the same scheme of reducing the capital gains tax (income tax on corporations) and the sales tax on a 20-kilometers wide by 300-kilometers long strip around the train. That will be the free zone. We’re going to exploit the connection with the United States and Asia,” he indicated.

Since the beginning of 2019, the income tax (ISR, in Mexico) rate was reduced from 30 to 20 percent and the sales tax (IVA, in Mexico) went down from 16 to 8 percent in 43 municipalities of six states on the northern border, in addition to the fact that the minimum wage doubled from 88.36 to 176.72 pesos per day.

The Treasury Ministry is analyzing all that in the Master Plan for the Free Zone, which Marin foresees will be finished next October.

The goal is that in two years the railroad and port infrastructure on the Isthmus will be modernized, and at the same time the first industrial parks will be promoted and ready so that at the end of the six-year presidential term the bases for the six are settled, with 50 percent of the companies installed.

The bet is “to generate a whole pole of industrial, commercial and service development in a comprehensive way, but we’re going to mainly promote agribusiness to take advantage of all the zone’s raw materials,” he said, but admitted that there is no projection about investment, job creation, demand and cruise ships in the corridor and the generation of cargo that the project is expected to detonate.

The Trans-Isthmus Corridor, he said, is not new. Infrastructure has existed for the ports and the train since 1900, when Porfirio Díaz was president, but “it must be modernized and made efficient to attract the arrival of ships, so that they unload and transport their merchandise from one ocean to another.”

Rafael Marin assured that with the indigenous consulta (consultation) that the federal government held it obtained support for the Trans-Isthmus project and “a permanent dialogue was established with the indigenous communities so that they will participate, embrace it and are included. But, there will be consultations for the installation of each industrial polygon.”

Difference with the SEZs

“The fiscal incentives for the free zones will be different from the SEZs, because in the SEZs companies would not have to pay any income taxes for 10 years, but also they didn’t have such an easy scheme because they were asked for a very high investment amount of 90 million dollars for generating 500 jobs, so that only large firms would be able to access the project,” he explained.

He considered that the decrease in tax collection due to fiscal incentives in the free zone would be less than foreseen with the SEZs.

–Is all the previous work on the SEZs thrown out?

–I don’t know. We are betting on other development models, different, and we are focused on that.

He maintained that, different from the New International Airport for Mexico (NAIM, its initials in Spanish), the government of President Andrés Manuel López Obrador had not planned to eliminate the SEZs and “we explored the possibility that the zones of Salina Cruz, Oaxaca, and Coatzacoalcos, Veracruz would remain as part of the Trans-Isthmus Corridor.”

Not seven, because that’s too many and “they would pulverize” resources and efforts. He even said that representatives of the World Bank and the Inter-American Development Bank commented to him that: “that project was not going to yield results because of being so scattered and it was not advisable to open seven zones in the country at almost the same time,” besides the fact that 90 percent of the SEZs in the world have failed.

In the end, we decided to eliminate the SEZs. Marin discarded lawsuits against the federal government, maintaining that: “there is really no commitment and it wasn’t advanced enough. We have time to get out of this SEZ project. We are unraveling it. The companies made their requests and procedures, but we had not authorized any permits.”

He assured that only seven companies had advanced procedures for being installed in Coatzacoalcos, Lázaro Cárdenas, Chiapas, Yucatán and Campeche, with a joint investment of 1.5 billion dollars, but, he added, among them are included the Agro-logistical Industrial Park of the Southeast and Arcelor Mittal, which are already installed in those zones.

The land that the state governments donated will be returned to them, he added. If the states want to they can go ahead with a part of the project to attract investments, like Yucatán will do, since many of the fiscal incentives were state or municipal.

While he admitted that the disappearance of the SEZs has caused concern and criticism from business leaders and from southeast governors, Marin Mollinedo considered that: “the criticisms are few and it’s more like fussing.”

Not even in the high level meeting between entrepreneurs of the United States and Mexico, which was held two weeks ago in Merida, was the subject of the SEZs proposed, he said.

To the contrary, he said that there is not a day that he doesn’t receive in his office representatives of both national and foreign companies, like the big shipping companies, interested “in not being outside of the Trans-Isthmus project.”

Regarding the previous government’s project of forming the SEZs, three already had the creation decree (Coatzacoalcos, Lázaro Cárdenas and Puerto Chiapas), two others had been approved (Salina Cruz and Progreso) and the remaining two (Tabasco and Campeche) their decision was under review.

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Originally Published in Spanish by La Jornada

Wednesday, April 24, 2019

https://www.jornada.com.mx/2019/04/24/economia/018n1eco

Re-Published with English interpretation by the Chiapas Support Committee

 

 

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