BUSINESS SECTION

By Samuel Peña Guzman
Foreign Investment Coodinator State of Nuevo Leon

The problem of legalizing used cars coming from the United States and the legalization of our fellow citizens residing in the USA are similar problems and both as complex, because general factors seem to be the same considering the costs and benefits each could bring.

The subject is controversial and paradoxical in Mexico, because this situation undoubtedly affects car dealers there. However, it is a problem similar to that discussed with the American government regarding the legalization of our fellow citizens who are "illegally" residing in the United States.

The subject was brought up again a few weeks ago in some states in the north of Mexico due to some statements made by governors. The demand for used cars coming from the United States is rising by the day, especially due to their low price when compared to Mexican cars. Denying the increasing presence of these cars in Mexico would only prove the authorities naïve.

Nuevo Leon Governor recently said he would be pleased with the legalization of these cars, mentioning the income it would bring to the State Treasury, as well as the vehicles control and safety it would bring if cars were registered. As we mentioned above, the subject is very complex and car dealers, in this case from Nuevo Leon, promptly made comments and criticized the Governor´s statement.

It is undoubtedly a latent problem, especially because every day more "illegal" cars enter Mexico to later obtain the protection from organizations such as ONAPPAFA that offer the service to regularize these cars for an affordable price, and most of all for a price way below the cost of purchasing an automobile from a Mexican car dealer.

The problem is similar to that faced by the US Government due to the increase in the immigration to said country. Immigration increases day by day and regularizing the legal status of these immigrants could send the wrong message to those who illegally cross the border by giving them the prize of the legal residence in spite of the fact that they broke US immigration rules.

Likewise, regularizing cars that have illegally entered the country could mean an incentive to purchase this type of cars to later legally import them into Mexico, causing a significant damage to the Mexican automotive industry.

However, not legalizing these cars means denying an existing problem and for the Government it means not acknowledging the problem this represents.

Both positions have a reason to be. Even if upon entering North America Free Trade Agreement with the USA and Canada certain restrictions were set on this issue with the firm objective to protect the Mexican industry - it will not be until 2009 when we are allowed to legally import used cars from the USA to Mexico - legalization of cars that are at least 10 years old is currently allowed. Maybe this could be the answer to why there are so many junk cars in Mexico, mainly in the border cities with the USA.

The problem is complex, the Mexican industry provides for jobs in Mexico; however prices of cars, mainly used cars, are way above those offered by smugglers that bring cars from abroad.

In conclusion the solution is not easy. However, if the Federal Government is really planning a massive regularization under the criteria of having a better vehicles´ control, together with the income this could bring, this new public policy must go together with a harder control by fiscal authorities, mainly the Ministry of the Treasury, the institution responsible to prevent the entrance of these cars to Mexico, by avoiding and/or decreasing the entrance of illegal vehicles.

Both criteria are valid. However, the problem lies, not in "which" policy or new rulings must be set but "how" will it be set and implemented, in this case by state governments. As we have already mentioned, it is exactly the same problem as that set by our fellow citizens to the American government. It is a real paradox of life, while the United States analyze how to control the entrance of people, authorities in Mexico lack the means to control the entrance of foreign vehicles. Anyways, both governments are with their backs to the wall.

Hector Samuel Peña LL.M, MPA Currently works as a Foreign Investment Coordinator for the State Government of Nuevo León. Contact at: samuel.pena@mexicoglobal.com

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