Border Retailers Hope for Feliz Navidad

With U.S. in Downturn, Southwestern Cities Are Courting Mexicans, and Praying the Peso Strengthens


Laredo, Texas

Merchants in this border town on the brushy banks of the Rio Grande have pretty much given up on a Merry Christmas. But they’re still optimistic about a Feliz Navidad.

Sales to U.S. customers are slumping here like everywhere else. But Mexicans account for roughly half the retail business in Laredo, which like dozens of border cities has built up a bi-national shopping district that has boomed in recent years.

Border retailers court Mexicans

J. Michael Short for The Wall Street Journal

Purchase-laden pedestrians pass over International Bridge I on their return to Nuevo Laredo after shopping downtown Laredo, Texas, Nov. 26.

So as the American economy tanks, retailers and civic leaders in Southwestern cities such as Laredo are courting Mexicans more heavily than ever, hoping that they will save the holiday shopping season.

There’s just one problem: Mexico has its own economic woes. Its currency has tumbled, crimping the purchasing power of Mexicans who cross the border to shop, just when U.S. retailers need them most. The exchange rate, which was 10 pesos to $1 in August, is now about 13.25 pesos to $1.

“We’ve learned to work with the economies of two countries here in Laredo, but we usually only have one struggling at the same time,” said Carlos Villareal, Laredo’s city manager. “This is a double whammy.”

Although sales tax receipts for last month aren’t available yet, Laredo officials estimated that sales had dropped for the first time in months. Retailers are hoping their promotion efforts to lure Mexicans will save the holidays for them.

Border retailers court Mexicans

J. Michael Short for The Wall Street Journal

A bilingual sign promotes the Relaxation Station to shoppers at Mall del Norte in Laredo, Texas.

Moneyed Mexicans who come to the U.S. in search of bargains and trendy fashions generate roughly $8 billion in sales annually from Texas to California, according to research earlier this decade by the University of Texas-Pan American.

“We have Wal-Mart in Mexico now, but I drive two and a half hours to come here because the same pair of pants can cost half what I pay at home,” Mexican shopper Armando David Sanchez said as he walked through a Laredo parking lot filled with cars bearing Mexican license plates. “Sales in the U.S. are simply better.”

The two-nation shopping economy means double the upside during prosperous times — especially for smaller cities such as Laredo, an inland port of 217,000 people two hours south of San Antonio, and McAllen, another border city with a sprawling shopping complex. While most U.S. retailers bet big on Black Friday, border merchants also get a boost from November’s Dia de la Revolución holiday, when Mexicans celebrate the modern founding of their nation — and then shop.

“If you’re going to buy a little birthday present, you will do it here in Mexico. But if you are going to buy a wardrobe, you are going to Texas,” said Silvia Garza, a vice president of a McAllen Chamber of Commerce branch in Mexico’s Monterrey.

Border retailers court Mexicans


Tapping into wealthy Mexican shoppers has been a bonanza for cities along the 1,969-mile U.S. border, including Tucson, Ariz., where an opulent center known as La Encantada is still bustling. “The farmers in Hermosillo in Sonora [Mexico] had a good year, so we are seeing heavy traffic,” said Melanie Sutton, a marketing manager for theMacerich Co. mall.

A bi-national clientele carries twice the risks as well. After the so-called Tequila Crisis of 1994, when the peso lost 40% of its value in a week, sales at some Texas shopping emporiums dropped 80%.

“El Paso got the hangover,” said Tom Fullerton, an economics professor at the University of Texas at El Paso.

Economists familiar with the historic link between the value of the peso and sales in Texas say another decline is inevitable. “If half your sales are going to Mexican nationals and the peso takes a dive, you are going to take a big hit,” said Keith R. Phillips, a senior economist at the Federal Reserve Bank of Dallas.

Still, Laredo leaders are hoping that Mexicans will continue coming — and they are taking extraordinary steps to entice them.


Border retailers court Mexicans

J. Michael Short for The Wall Street Journal

Laredo shopper Mike Trevino makes a purchase at an AT&T kiosk where a bilingual advertisement offers the “plan AT&T Mexico Commuter” at Mall del Norte.

City boosters recently left thousands of bags filled with promotional offers on doorsteps in San Pedro Garza Garcia, a wealthy Monterrey suburb that has been called Mexico’s Beverly Hills. The deep discounts, intended to help offset the weaker peso, included 11% off at Macy’s Inc., and up to 20% at other shops in Texas. Laredo’s promoters also hosted fashion shows in Mexico at a private club where well-heeled women gather for breakfast.

“If we can offer a 20% discount, maybe all this balances out,” said Laredo Mayor Raul Salinas.

So far, Mexican shoppers are still showing up. But some merchants said sales are slower due to the peso’s pinch. “They’re not buying,” lamented Orlando Medina, manager of a store that sells Prada and Gucci eyewear almost exclusively to fashion-conscious Mexicans.

Laredo’s misfortunes would sound pretty good to other U.S. retailers, said Stephanie A. Zuniga, marketing manager for Laredo’s Mall del Norte.

Sales at the mall declined in October but it still expects healthy gains this year thanks to its clients south of the border, Ms. Zuniga said.

Write to Miguel Bustillo at

Printed in The Wall Street Journal, page B1


Source: The Wall Street Journal