Across the border, the comforts of home

While Jonathan Heath was studying economics at the University of Pennsylvania during the 1970s, he bought himself a state-of-the-art stereo system. When he returned to Mexico upon completing his degree, he brought the stereo home and sold it for five times what it cost him.

Image:Alejandro Zarate

That was what it was like in Mexico in the days before the North American Free Trade Agreement (NAFTA) went into effect in 1994. Lots of international consumer products, from washing machines to toothpaste, were available only for several times the American price, if they were to be had at all.

“When someone went to the States in the 70s and 80s they brought a list of things their friends and relatives wanted them to bring back, even things like toothpaste and soap,” says Heath. “If you had a cordless telephone it meant you’d been to the States. Nobody could buy one here.”

With the advent of NAFTA, Mexico’s exports skyrocketed, and Mexican imports of foreign goods shot upward too, once prohibitive tariffs were eliminated.

Heath believes one of the main reasons for the burgeoning number of American baby boomers coming to live in Mexico is the simple fact that they can find the things they want in stores here as easily as they can in the US.

“They come here, they live here, and they can still buy the same things,” he says. “All they have to do is go to Wal-Mart.”

Heath, now HSBC’s Chief Economist for Latin America, isn’t quite an expat, though in many ways he thinks like one. Both his parents are Canadian and currently live in Canada, but Jonathan was born in Mexico and has lived here all his life.

Expat John Gardner, who has lived in Mexico since 1994 and runs an insurance agency in Mexico City as well as a social group called Mexpat, agrees: “You can even get real Canadian maple syrup here!”

“As a Canadian, I remember finding it hard to find maple syrup and any type of beer other than Mexican,” he says. “The arrival of Wal-Mart and other large retail chains like Costco took care of that. This was a good thing too, considering the post-9/11 [airline] cabin restrictions on liquids. You don’t want to put maple syrup in your carry-on luggage!”

People who argue the pluses and minuses of NAFTA -- not just in Mexico but also in Canada and the US -- talk about jobs, exports, investment, and the distribution of the wealth created by increased trade. While focusing on production, many forget the sector that arguably benefited the most, the one that we’re all part of -- consumers.

Eric Rojo, who was born in Mexico, says, “I think the effect [of NAFTA on the migration south] was indirect, but happened through the greater availability of consumer goods in Mexico.” Rojo, Executive Vice-President and Chief Operations Officer of the Washington-based United States-Mexico Chamber of Commerce, adds: “Now, the kind of life that’s available in Mexico is the same as it is in the US. For those [expats] that want to integrate, they can enjoy all that Mexico has to offer. For those that don’t … well, it can be as if they never left.”

In other words, Mexico’s consumer sector provides that final added attraction for retirees and other expats, along with the things that have been here all along, like reasonably priced beachfront houses, great climate and scenery, and, for Americans and Canadians, the ease of bringing your car.

An October 2005 study of Mexico’s retirement housing market, produced for CEMEX by consultants Active Living International, estimates that there are about one million baby boomer expats living, or at least wintering, in Mexico. This figure, confirmed by a recent BBVA Bancomer study of the expat market, has certainly increased in the last two years.

This trend is only the beginning: the Bancomer study quotes US Census Bureau figures stating that the number of baby boomers reaching retirement age -- potential customers for Mexican retirement services -- will continue to grow until at least 2025. Walter Russell Mead, a Senior Fellow at the Washington, D.C.-based Council on Foreign Relations, estimates in his book Power, Terror, Peace and War that the average baby boomer household contributes, on average, about $55,000 USD to its local economy.