Peso Problem: As Mexico currency weakens, border retailers feel the bite

HARLINGEN — Low oil prices are causing distress for energy-centric Texas cities like Odessa and Midland, where state sales tax allocations show continuing declines in retail purchasing.

But depressed worldwide oil prices also impact the retail economies of border cities like Harlingen.

The reason is found in Mexico, where low oil prices are being blamed for the weakening of the Mexican peso versus the U.S. dollar. In fact, the official exchange rate yesterday was pushing the unheard-of rate of nearly 20 pesos to the dollar at 19.7 pesos per USD.

A study commissioned by IBC Bank found that in a 20-county area covering the Texas-Mexico border and South Texas during 2011 and 2012 Mexican shoppers spent $5.1 billion on the United States side of the border.

So the effect on border cities when the peso is weak versus the dollar is believed to be significant.

Mexican consumers, who for decades have crossed the border to shop, may no longer be making the trip or are buying less when they do because they don’t receive as good a return on their spending.

Harlingen isn’t as dependent on this cross-border retail shopping as other border cities, mostly due to the fact it doesn’t have a busy border bridge to Mexico nearby.

Nevertheless, Harlingen’s retail numbers show the city is going to be about $10 million under anticipated projections in net taxable retail sales primarily due to the peso-dollar exchange rate, Raudel Garza, chief executive officer for the Harlingen Economic Development Corp., said yesterday via email.

The loss of Mexican spending accounts for about 1 percent of Harlingen’s annual net taxable retail sales, which total about $1.1 billion annually.

Still, Harlingen has shown steady, if limited, retail sales growth and as of July was up 1.84 percent overall for the year in state sales tax reimbursements. Those state monies returned to cities are regarded as a measure of local economic health.

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