360° Analysis

How Mexico’s Drug War is Boosting US Border Economies


August 02, 2012 02:28 EDT

Marc Frankel points out how Mexican drug war turned the US side of the border into a flourishing region.

One could be forgiven for assuming that the violence on Mexico’s northern border has had a devastating effect on the US border towns and cities.  After all, many of those towns lie just feet from the cartels that dominate northern Mexico, separated from the horrific violence by a thin ribbon of shallow, muddy water only a few feet deep.  It’s not very often that being close enough to hear the daily sound of gunshots from across an invisible international line has a positive effect on a community, but in Rio Grande City, Texas (population: 14,000), that is exactly what is happening.

Rio Grande City (known as “RGC” to its residents) is the biggest town for an hour east or west along Texas Highway 83.  For much of its 160-year history, RGC has been the site of trade and commerce with communities across the river, ferrying raw materials and produce northward to the United States and finished products south. The local RGC economy reached its heyday in the early 20th Century, and crumbling turn-of-the-century buildings that litter downtown RGC serve as a reminder of the town's once-prosperous past.

For much of the last 50 years, RGC and many similar border towns have been crippled by their proximity to Mexico, losing business to cheaper southern alternatives.  Residents would often cross into Mexico on day-long trips to shop, visit doctors, fill prescriptions, and have vehicles maintained.  Because of favorable exchange rates, labor costs, and health care systems, virtually any good or service was significantly less expensive just a mile or two below the Rio Grande. 

As drug-related violence in Mexico has grown, however, fewer and fewer RGC residents have been willing to make the trip across the border.  Service providers have also begun to stream northward to set up shop in the United States.  According to Dr. Maria Cantu-Ramaciotti, Ph.D. of Latin American Border Theory from the University of California at Berkeley, many have immigrated because local drug cartels have begun imposing a “quota” system on business owners in Mexico.  Much like a Mafia protection racket, quotas range from $20 to $2,000 per month and assure the shopkeeper or service provider immunity from the cartels.  For many doctors, dentists, mechanics, butchers, and street vendors, the combined effect of losing their northern customers and having to pay the monthly quotas has forced them to pick up stakes and move to American towns across the river.

Dr. Cantu-Ramaciotti goes on to point out that the US Border Patrol’s policing of the border area has indirectly provided a boom to local economies.  US Customs and Border Protection’s strategy in Texas is to patrol the Rio Grande River, but also to set up checkpoints further inland to catch illegal immigrants or drug shipments heading for Austin, Dallas, and further into the United States.  With so many RGC residents waiting for citizenship documents, those checkpoints provide a disincentive to travel northward for goods, services, or health care.  Therefore, many border residents can’t go north, can’t go south, and the nearest major city to the east or west is McAllen, about an hour’s drive away.  As such, the population of the Rio Grande Valley is effectively a captive audience for local businesses. 

Both Dr. Cantu-Ramaciotti and RGC Mayor Ruben Villarreal point out the positive effects that geography and geopolitics have had on the local economy.  H-E-B, the major supermarket chain throughout southern Texas and northern Mexico, has annual sales of some US$15 billion, and its RGC location is its largest and most profitable.  Increased Border Patrol presence has also provided a boost to the local economy, as many agents live in the towns they patrol and patronize local shops and restaurants.  Their US Government salaries far exceed the $21,000 median household salary in the region, and as a consequence Border Patrol agents can enjoy a high standard of living while pumping cash into the economies of the communities they’re sworn to protect.

Mayor Villarreal points out that Rio Grande City’s tax receipts have skyrocketed over the past three to five years.  “I would say that we’ve thrived in these economic times,” he said in a recent interview.  Despite RGC’s recent good fortune, Mayor Villarreal and the town of Rio Grande City understand that their gain has largely been a result of Mexico’s instability and some favorable commodity market prices (much of the economy in RGC is dependent on agriculture).  The town has been quick to put its tax receipts to good use through some sorely needed infrastructure projects, including a $21 million water treatment plant and $6 million in street repaving and construction.

Despite the recently sunny outlook for border towns like Rio Grande City, the future remains uncertain.  According to Dr. Cantu-Ramaciotti, only 450 of the local high school’s 2,100 students graduate each year, and many who do graduate have little money for college.  Mayor Villarreal acknowledges that the strong beef and grain commodity prices could fall at any time, and that eventual peace among the cartels and government forces in Mexico could create a boom on the southern side of the border to the detriment of the north.  Until then, however, the narrow strip of land in Texas between the Rio Grande River and the Border Control checkpoints 60 miles inland will likely continue to boom as much of the rest of the United States languishes in post-recession stagnation.

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer's editorial policy.


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