THE PRD IN PARADISE: BAJA CALIFORNIA SUR

UNCLAS TIJUANA 001203 E.O. 12958: N/A TAGS: PGOV ECON EINV SUBJECT: THE PRD IN PARADISE: BAJA CALIFORNIA SUR SUMMARY -------------- Located on the southern tip of the California peninsula over a thousand miles from the congested, sometimes violent border region, the Mexican state of Baja California Sur (BCS) is one of only a handful of Mexican states with no drug trafficking related murders in the past year. This quiet atmosphere combined with its spectacular ocean views means the state continues attracting foreign investment in the tourism sector, despite the global economic slowdown. Critics note BCS' economy is too dependent on the volatile tourist trade and the state government, which has close links to foreign investors, is doing nothing to diversify. BCS' isolation means there is little political competition, with the Democratic Revolutionary Party (PRD) firmly ensconced and bickering internally. END SUMMARY OVERPRICED MARGARITAS AND BEAUTIFUL BEACHES: A SOUND ECONOMIC PLAN? -------------- -------------- -------------- ¶2. An estimated fifty percent of BCS' economy is either directly or indirectly linked to tourism, most of it centered in Cabo San Lucas and Los Cabos on the southernmost tip of the peninsula. The state's quiet, pleasant capital of La Paz used to be a booming trade town when merchants on the peninsula were able to import goods tariff-free under Mexico's "Zona Libre" program and businessmen from other Mexican states would travel to La Paz to purchase goods. With Mexico's accession to the GATT in 1987, the border region and the California peninsula lost its competitive advantage in importing, and the local government is turning to tourism to fill the gap. The state is trying to expand tourism beyond the traditional Cabo resorts and claims to have thirty-eight hotel and condo projects worth USD 30 billion lined up, many from Spanish investors. The state's Minister of Tourism, Alberto Trevino admits, though, that the only projects that have actually left the drawing board are new resorts just north of Cabo on the eastern side of the peninsula and in Loreto, a small town three hundred miles to the north. Trevino says that investment continues, despite the global slowdown and a ten to fifteen percent drop in tourist numbers this year, but admits the rates of investment may slow and efforts to expand tourism to La Paz and other, poorer areas in the state could be hindered. ¶3. Carlos Lira, president of the local Mexican National Chamber of Commerce (CANACO) says the state economy is already feeling this decline in tourism. Manuel Angeles Villa, an economist at the Autonomous University of Baja California in La Paz (UABC) contrasts BCS with Hawaii, another geographically isolated economy dependent on tourism, but which has more successfully diversified into other industries. He states that the tourism industry leaves the state economy too dependent on the whims of foreign capital and believes the profits of these investments do not stay in the state. Angeles Villa probably underestimates the important impact of the jobs these types of investments create, but it was clear in poloff's meetings with both the municipal and state governments that local officials are pursuing tourism investment single-mindedly, without thought to diversifying the economy. ¶4. Lack of diversification is not the only risk in BCS' determined pursuit of more tourism investment. Even the mayor of La Paz, Rosa Delia Cota Montano, a strong proponent of tourism investment, concedes that issues of land tenure, as so often in Mexico, complicate this type of investment. Most of the land purchased by foreign investors are purchased from "ejidos", Mexican farming communities set up during Mexico's agrarian reform. What most investors (and "ejidatorios") don't know is that the strip of land closest to the coast is considered public land and that the federal government may have awarded that strip of land as a concession to a third party many years prior to the investment. This means the investor, having purchased the land adjacent to the conceded strip must either negotiate with the holder of the concession or abandon the investment. Investors and the government also have to contend with environmental groups, who oppose much of the development and claim the resorts limit the local population's access to the beaches. POLITICS BASED ON THE COTA FAMILY AND THE LOCAL PRD -------------- -------------- -------------- ¶5. These concerns aside, the state's focus on tourism is not likely to change. Almost all observers believe PRD State Governor Narciso Agundez is close to many of the foreign investors (though the nature of the relationship is murky),and there is not enough political competition in the state to suggest any change in the political scene in the near future. Ever since former Institutional Revolutionary Party (PRI) member Leonal Cota failed to receive the PRI nomination for governor in 1999 and decided to switch to the PRD, the state's politics have been dominated by PRD (most southern Baja Californian "perredistas" are former "priistas"),and the opposition PAN and PRI parties are now divided and weak in the state. The only political competition comes from internal party bickering, which is likely to increase when Cota returns to the state after serving as the PRD's national president. Cota is known to be closer to the Lopez Obrador/Encinas faction of the PRD and is expected to promote the La Paz mayor, his sister, for the next governor. Agundez, meanwhile, who is closer to the New Left faction of Jesus Ortega, will likely have his own candidate. Despite Cota's notoriety, political observers in the state do not see any other local politician with potential for emergence on the national scene, at least not in the short term. This means the BCS "perredistas" will look to even further solidify their power locally. ¶6. COMMENT: With insular politics and an overly specialized economy, some might see BCS' future as bleak, but it appears to be weathering the global economic slowdown as well as any other part of Mexico, and even critics of the PRD government admit government services and transparency have improved since the ousting of the PRI. Controversy over resort development will continue, but is unlikely to stop development. BCS' insulation from the narco-violence and ability to attract tourism is a matter of geographic luck more than any local government policy, but it means it can offer its citizens a nicer way of life than many other Mexican states. END COMMENT KRAMER