Politics is twice as complicated along border

In US border towns, interest is high in Mexico's July 2 election - a result of closer economic ties.

With presidential elections just around the corner, shopkeeper Michael Begum is keeping informed. He reads the newspaper. He watches the nightly news. He's not sure there's a dime's bit of difference between the two main candidates - neither of whose name is Bush or Gore.

Mr. Begum's fascination with another country's politics is more than academic. What happens in Mexico's July 2 elections may have more immediate economic impact on his high-end dress shop - and businesses all along the US-Mexico border - than the changing of the guard in Washington.

Denizens of the 2,000-mile US-Mexico divide are forced to take a keen interest in the political scene next door: Even though they can't vote, they have a lot riding on the election. The intertwined nature of the Southwest is just one example of the globalization of modern markets, in which no country can remain unaffected by its neighbors' business.

Brownsville residents' unease stems from a range of causes, from countries like Japan threatening to pull its investment dollars if the elections aren't clean, to recent history: The peso has suffered a devaluation in each of the past five elections. What a devaluation would mean for Begum and his fellow residents is fewer Mexicans coming to town on shopping trips, playing havoc with border businesses' bottom lines.

"I've seen seven presidential elections, and five peso devaluations," smiles Begum, a dapper Russian veteran of World War II, who bears an uncanny resemblance to the author Gore Vidal. "It's emotional, but I survive it."

But this year's election could be a turning point for Mexico, and to the US towns that depend on its stability. Mexico's ruling party, the PRI, could lose its first national election in 71 years.

And the country's international-trade-driven economy is widely thought to be strong enough to weather any political storm.

Smaller pinch on pocketbooks

That's partly because Mexico's economy - and, by extension, that of the border - is less tied to the vagaries of politics than in the past, experts say.

"The economy is a totally different arena than it used to be," says Arturo Farias, senior vice president for international trade at the International Bank of Commerce in Brownsville.

The single biggest driver in this new economy is NAFTA, the North American Free Trade Agreement, enacted in 1995. Designed to encourage the flow of goods and services among the US, Mexico, and Canada, NAFTA has reduced regulations in all three nations and increased overall trade. Before NAFTA, total trade between United States and Mexico in 1994 was about $40 billion. Last year, it was $180 billion. The effect on the border, proponents say, has been increased jobs on both sides.

In addition, Mexico has been working to lower its debt and reduce its spending, to please its lenders from the International Monetary Fund, which gives less room for the sort of mismanagement or corruption that has weakened Mexico's currency in past elections. "Overall," says Mr. Farias, "the economy is at a very stable place."

Signs of that stability are everywhere in this border town.

Drive to the Wal-Mart or the Circuit City, just a minute away from one of Brownsville's three ports of entries, and you'll see busloads of Mexican shoppers from Monterrey or Tampico crowding the aisles, checking out the latest fashions or DVD players.

Down at the RadioShack in Brownsville's Amigoland Mall, business has never been better. It's so good, in fact, that corporate headquarters has opened a branch in Brownsville's larger sister city of Matamoros, and both stores are thriving.

"It'll be no big deal," says Dora Mendoza, a saleswoman, about next month's election. "It's all about customer satisfaction now. If we follow up with customers, and give good service, they come back."

Cross-border political prognosis

Store manager Hector Ruiz, himself a native of Mexico City, says he believes Mexico will have a closer, fairer, and more stable election than the country has seen in a long time.

"It's getting better in Mexico, compared with the past," says Mr. Ruiz. "Before, they could do whatever they wanted to, and just adjust the peso to pay for it. But now that everyone is watching, including investors in the US, Europe, and Japan, they have to have a clean election in order to keep the investors coming back."

A salesman named Reynaldo, who lives in Matamoros, is not so sure.

"There's a lot of corruption in Mexico. We're famous for that, right?" says Reynaldo. Like some businessmen here, he frets that a change of power will not only reveal irregularities in the current presidential administration's bookkeeping, but also likely disrupt many of the bureaucratic functions that keep business running (somewhat) smoothly.

"The economy in Mexico is not so strong to support another change of administration," he says, with a shrug.

There is certainly reason for businesses to get unsettled at election time.

In the past 24 years, through five elections, the peso has dropped in value by some 83,200 percent, from 12.50 for $1 in 1976 to an estimated 10,400 pesos for $1 this year. (Officially, the peso is currently trading at 10 pesos to the dollar. In 1991, the Mexican government simply eliminated three zeros with the stroke of a pen.)

Even so, many business leaders say that border towns like Brownsville can simultaneously take advantage of Mexico's booms and take shelter from Mexico's busts.

Under NAFTA, for instance, towns like Brownsville and McAllen have attracted dozens of manufacturing facilities both here and in their sister cities across the border, where wages are cheaper.

It's an arrangement that has created nearly 25,000 new jobs since 1995, and brought double-digit unemployment here down to 8.7 percent.

And it has shifted Brownsville's economy toward international trade, and away from mere shopping.

Frank Feild, president of the Brownsville Chamber of Commerce, says the new economy is transforming a once-sleepy border town into a rather happening place.

"It's like being popular in high school," chuckles Mr. Feild. "If you don't have a date, you can't get a date, and if you have a date, then everyone wants to go out with you. That's what we're seeing right now."

(c) Copyright 2000. The Christian Science Publishing Society