MCALLEN, RGV – There is another reason, other than ugly rhetoric, the peso devaluation and violence in Reynosa, for the reduction in Mexican shoppers visiting McAllen – a change in the banking laws as it relates to accounts held by foreign nationals.
This is the view of Keith Patridge, president and CEO of McAllen Economic Development Corporation. He explained his views at a McAllen South Rotary Group luncheon at the McAllen Country Club on Friday.
Patridge discussed what he believes is a negative impact of the Bank Secrecy Act and the Dodd-Frank banking reforms when asked a question from the audience about why fewer people are checking in to McAllen area hotels.
“I am not an expert but I think it is a combination of things,” Patridge said. “I think some of it is because the shoppers are not coming on a weekend. Some of it has to do with the rhetoric that is out there, such as building a wall, or more specifically, who is going to pay for the wall. The big thing, in my opinion, is it has a lot to do with the violence.”
Patridge asked if there were any bankers in the room because he would be interested in their views on his analysis.
“I been here for 30 years. I have seen a lot of the peso devaluations that have come and gone. Whenever you had a peso devaluation you would see an influx of people from Mexico, businesses, coming over and opening bank accounts and bringing their pesos over, literally on a daily basis, sometimes in a bag, to deposit in their accounts to protect their pesos from devaluation,” Patridge said.
“Normally, you would have thought that would have happened during the recent devaluation, which was fairly significant last year. But it didn’t and we started looking at why.”
Patridge said what the McAllen EDC is hearing, including from bankers, is the impact of the Dodd-Frank Act and the Bank Secrecy Act, and, specifically, a provision whereby bankers have to track the source of the revenue being deposited in their bank.
“It is getting to be so costly (for banks) to do that with Mexico depositors, they are literally telling their Mexico depositors, come pick up your money and take it back. Traditionally, people shop where their money is. Their money is not here anymore. It is in Mexico. They are losing money through devaluation. You think a family is going to fill their pockets full of pesos or dollars and drive on an autopista to the border? They are not going to do it.”
Patridge believes many Mexican visitors that used to come to McAllen for a weekend of shopping are now doing one of two things.
“They are either getting on an airplane and flying right over us to Dallas or Houston or another gateway, and they are spending their money there. Or they are not coming to the U.S. at all. Also, you have this little thing called Amazon that is coming into play now. Amazon is in Mexico. We have a developer here that just told us they are building two 4.5 million square feet Amazon warehouses in Mexico City.”
Patridge said the change in banking laws is one of the reasons why hotel occupancy rates are down in McAllen. He pointed out, however, that he is not expert in retail development or the hotel industry. He said under its charter, McAllen EDC is charged with bringing in industrial development.
“We do not do retail. We see the peripheral. But, we do know Mexico because we are there almost every day. I know this because we were in a meeting at the mayor of Reynosa who is a doctor. She was the under-secretary of health under the last presidential administration. Her husband is a doctor and we were talking about retail shopping and she said, you will not believe what happened to me. She said, ‘I have had an account in McAllen for 22 years and I just got this letter.’ And she pulled this letter out of her pocket that said, ‘we are closing your account, you can come over and pick up a cashier’s check.’ She said, ‘I have had my account closed.’ And it is not the bank’s fault. It is what is happening with the Bank Secrecy Act and Dodd-Frank.”
Impact of Maquilas
Earlier in his remarks to the McAllen South Rotary Club, Patridge spoke about an informal survey McAllen EDC conducted with McAllen area hotels. The survey found that the maquila industry, its suppliers, and manufacturing generally, accounts for 36 percent of the business McAllen hotels do.
“I know the hotels are having a difficult time right now,” Patridge said. “We did a survey of all the hotels that are located just in McAllen. We talked to the managers, and we found out that approximately 36 percent of the total bookings for the last year in McAllen were from companies we bring in or their supplier companies. So, basically, what we do spins out into the community. It is important and we want to increase that. As companies bring suppliers in, as companies bring new lines in, they tend to stay in hotels.”
Editor’s Note: This is the first of a two-part series based on McAllen EDC President Keith Patridge’s remarks to the McAllen South Rotary Club. Part Two, focusing on manufacturing in McAllen and Reynosa, will be published tomorrow.