Change in Government,  Change in Tourism?

By Deborah Van Hoewyk

When you planned your trip to Oaxaca, especially to Huatulco, what did you think about?  Flights?  Food?  Hotels?  Fun with friends?  All the things you could do?   But how much time did you spend thinking about whether the inauguration of Mexico’s new president, Andrés Manuel López Obrador (best known as “AMLO”) would affect your plans?  Did you mull over the work of Mexico’s tourism institutions and how they might affect your experience?

The Mexican Secretariat of Tourism (SECTUR) has sub-secretariats for Planning, Operations, and Innovation and Quality; sponsors a center for graduate study in tourism; runs the roadside assistance program known as the “Green Angels”; promotes tourism through its Consejo de Promoción Turistica; and last, but not least, operates the Fondo Nacional de Fomento al Turismo (known as FONATUR) and its related maintenance entity.  

Huatulco is a creature of those institutions.  It is one of eight resort destinations planned and maintained by FONATUR.  Each resort area is a “CIP,” or Centro Integralmente Planeado, meaning they were started from scratch on land expropriated by the government, designed from a repertoire of resort features – should it have a marina?  How about a sector for luxury housing?  Should tourists shop on “Fifth Avenue”?  Where should the hotels be?

The five largest were started between 1974 and 1984:  they are, in order, Cancun (Quintana Roo), Ixtapa-Zihuatenejo (Guerrero), Loreto and San José del Cabo (Baja California), and Huatulco (Oaxaca).  Several have had to be “relaunched” due to “slow takeoffs” – Huatulco was relaunched twice, in 2006 and 2015. 

Fast forward to 2018, when in late November and early December – Mexico inaugurates its presidents on December 1 – rumors were rife that AMLO had taken money away from FONATUR, so much moolah that FONATUR was bankrupt, AMLO was eliminating the Tourism Promotion Council, AMLO was cutting off the Pueblos Magicos program, AMLO was canceling the new airport and expanding a former military airport instead.  

In other words, AMLO was decimating the tourism budget, supposedly in favor of a pet project, the Tren Maya.  The Mayan Train would be a “culture and tourism” effort that would link destinations in Tabasco (AMLO’s home state), Chiapas, and the three states on the Yucatán Peninsula.  The train would be built with $28 billion MXN (± $14.67 million US) taken from the tourism budget over four years, and since that’s no way enough to build 1,500 kilometers of track, put up stations, buy locomotives and cars, etc., there would be partnerships enabling private investment.  The whole price tag fluctuated wildly, but eventually settled down at about $150 billion MXN (±$7.88 billion US).     

Mexico’s Tourism Budget

It doesn’t pay, quite literally, to mess around with the tourism budget, because tourism is a major pillar of the Mexican economy.  It is difficult to account for tourism’s contributions, because it affects other sectors and produces more income than can be measured either directly or indirectly.  However, by the end of 2016, the most recent year for which comprehensive data are available, tourism directly contributed 8.5% to Mexico’s GDP; it directly paid for 5.8% of the country’s jobs in the formal sector, and who knows how many more in the informal sector.  In addition, tourism creates an important indirect “economic spillover,” i.e., tourists buy goods and services outside the “official” tourism sector, so the overall contribution to GDP for 2016 was estimated at about 16%.  

Services are the largest segment of Mexico’s economy, and tourism constituted an impressive 77.2% of “service exports” (a hazy concept, but it basically means that when you the tourist come to Mexico from a foreign country and pay for a particular service, say, a tour to a local mezcal production facility, or palenque, outside Oaxaca City, you use your home currency – dollars, Euros, etc. – to buy the pesos that pay for your experience – which then goes home as an exported memory, the haziest part of this concept).  If you just think of tourism as foreign exchange, it’s the Mexican economy’s third largest source of foreign exchange, after the auto industry and remittances.

In terms of US dollars, 2016 brought in about $22 billion from international visitors and $116 billion from domestic visitors, i.e., domestic tourism contributed 84% of the total $138 billion in direct tourism revenues (excluding any spillover).  The national budget funded SECTUR with $5.9 billion MXN, or about $316 million US, so Mexico received about $4.37 US for every $1 US it invested in tourism.   

Troubling signs?

At the end of 2018, Mexico slipped from the 6th to the 7th most popular tourism destination in the world, attracting 41.5 million international visitors; it ranked 15th in the world for international tourist spending, which means individual tourists spent less in Mexico than in other countries.  Foreign direct investment (building tourist-oriented condos and apartments, hotels, etc.) in tourism dropped precipitously in 2018, from US $16 billion to about US $800 million.  And AMLO’s new tourism minister, Miguel Torruco Marqués, warned that international competition, especially from some European countries, might cause Mexico to slip further.  

The international Organization for Economic Cooperation and Development (OECD) published a Tourism Policy and Review of Mexico in 2017.  It points out that over the last 40 years, SECTUR has concentrated on the CIP model, and that in turn has shaped marketing, promotion, and thus demand.  “This model is now maturing, and is vulnerable to challenge,” which might come from changing consumer demand, environmental considerations, or other factors.  “It is unlikely that this model, in its current form, can support tourism policy objectives to promote more inclusive and sustainable growth.”  

Cancun, Cabo, Huatulco – apparently not where it’s at any more.  The OECD recommends that Mexico develop policies to support smaller-scale projects, encourage smaller community-based tourism businesses, and develop a more diverse range of tourism opportunities.

AMLO’s Take on Tourism

One might suspect that a guy who generates all those rumors about cuts to tourism and then holds a consulta (informal referendum) with only 1% of Mexico’s voting public to confirm that he should cancel a US $13 billion airport project might not have a grip on international tourism.  

Keeping in mind that outside assessment suggest tourism policy in Mexico needs to change, and that, popular as Mexico may be, international tourism is only about 15% of the market, AMLO’s ideas about tourism, and the budget he has allotted to pay for those ideas, seems much more reasonable than we might have expected.  

Under the previous administration, SECTUR’s 2018 budget was $3.7 billion MXN (about US $718 million), and that was $231 million MXN less than the 2017 budget of about $3.95 billion MXN (which was already way less than the $5.9 billion MXN in 2016).  AMLO’s budget gives SECTUR an increase from $3.7 billion to $8.8 billion MXN (about US $460 million).  Based on that budget, SECTUR has put out a Program Strategy.  The Tourism Board is still alive and well, but its funding has been cut by 5.6%.  The Pueblos Magicos program will continue, but mostly in the form of guaranteed loans to towns that want to increase infrastructure to attract visitors.  All other areas will continue to be funded, although perhaps emphasizing different aspects more consistent with AMLO’s ideas.  

Tourism over the Next Six Years

AMLO is very much concerned with how tourism can reduce poverty, benefit local people, and contribute to environmental and financial sustainability, principles that fit well with the OECD recommendations, but he is also interested in protecting existing investments.  At the end of February, he announced five goals for tourism under his administration:

1. Build the Mayan Train

2. Increase expenditures by tourists by focusing tourism promotion on wealthier countries

3. Improve living conditions for tourism workers

4. Ensure the safety of top tourist destinations (e.g., the CIPs, Acapulco, Puerto Vallarta)

5. Develop less well-known tourism destinations

Almost all the increase in SECTUR’s budget – and then some – $5.8 billion MXN, or US $305 million) will go to the Mayan Train project, which will be carried out by FONATUR.  The government sees the Mayan Train as a good opportunity to solicit more foreign direct investment, although there is indigenous (about 80 groups oppose having people outside the Yucatán decide what should be done in the Yucatán) and environmental opposition (8 plant species, 94 mammal species, and over 400 bird species will be affected).  

FONATUR will also be investing in two of the three smaller CIPs, Litibú / Costa Capomo in Nayarit and Playa Espiritú in Sinaloa.  Started in 2005, Nayarit was declared un fracaso (failure) by 2009; nonetheless, in 2017 FONATUR developed a white paper on how to complete the resort.  Playa Espiritú was announced in 2008, seemed to have been born under a “bad sign,” and languished in the face of opposition from the hoteliers of Mazatlán.  The Peña Nieto government continued to let it languish.  

Today, it consists of roads and plantings, but nary a hotel room.  AMLO has been to visit, though, and he apparently sees an opportunity to express his philosophy of tourism, if not fiscal responsibility.  Playa Espiritú “will be for the benefit of Sinaloa.”  Finish it or sell it, “Those resources are going to be there for the people of Sinaloa.”  

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