Thursday, June 24, 2010

Good News for Car-Buyers

Felipe Calderón announced today that Mexico's tenencia tax, which imposes steep fees on Mexicans with new cars (I'm not sure on the specifics, but in my experience it's at least several hundred dollars a year for any car purchased within the last five years or so), is being phased out. As of 2012, no one will have to pay it. Calderón announced the plan as a stimulus for the auto industry, but this is also a gigantic bugaboo for virtually all car-owners, so it wouldn't be a surprise to see a bump to his approval ratings as a result. I'll be interested to see economic analysts pick apart the fiscal impact. The tenencia provides money to the state rather than the federal government, so this would seem likely to open up some rather gaping holes in state budgets. Since the federal government provides most of the state cash and the states don't have other significant revenue sources to replace the tenencia, you'd think something else is going to have to replace it. More to come...

2 comments:

Don Gringo said...

This is more Mexican magic. Veracruz and many states have hocked their receipts from tenencia for the next 30 years, in a process called bursatilizacion. The funds were then distributed to municipios for public works. No way that they can disappear the tenencia without issuing bonds to cover the 30 years of monies already spent.

pc said...

Hi Don Gringo, thanks for the comment.

Re the bursatilizacion, right, I read that Mexico State does the same thing. But whatever the future liability of the states, they all are going to be in huge trouble (either we're talking massive budget cuts or what sounds like potential default in Veracruz and Mexico) unless there is a replacement. So what's it going to be? Maybe I've just not poked around enough, and this is part of a broader fiscal plan or a not-yet-public agreement with the congressional PRI to enact new taxes, but based on what we know now, it just doesn't add up.