The Telegraph
Since 1st March, 1999
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Cancun investors chafe at rules
- Tariffs too high, cries a businessman but has no idea of WTO talks

Cancun, Sept. 14: “I export stuff out of central Mexico to the US with no fuss and the benefit of low tariffs there. But I pay outta my *** when I import anything into Cancun,” says R.J. Thoman.

Thoman is a 50-something Texan who moved to Mexico 13 years ago: he has a ranch in Central Mexico where he makes inflatable advertising products for companies at Games R Us (no relation to the famous Toys R Us).

Business has been bleak and he has more or less retired after retrenching half his staff. He has since moved to Cancun where he works part-time as a real estate broker selling space at a beachfront condominium on the road across the Convention Centre where the Fifth Ministerial Conference of the World Trade Organisation is drawing to a nerve-wracking close.

When Thoman first came here it was tough to get a work permit — the FM3 visa — though he was an investor ready to stump up cash for a venture out here. “It took me close to two years,” he says.

Import tariffs, foreign investment and work permits are all the hot issues that are being debated fiercely at the four-day conference, though agriculture has hogged all the attention.

Thoman can make no sense of all that is going on across the street from his small glass-fronted office where he sits and gloomily looks out hoping that someone will stop by to pick up a brochure on the condo that he says will be ready by February.

“I have been trying to sell the three-bedroom units for the past three months and things have been slow. August to October is the slack season at Cancun when we get the poor guys coming in for a holiday. I hope things will improve between December and March when the rich Americans come holidaying here,” says Thoman, who also owns a small stake in Fresno, a California-based Internet service provider.

When Thoman talks about the poor traveller he isn’t talking of the average backpacker you see slumming about the back streets off Calcutta’s Sudder Street. Average room tariffs in Cancun’s hotel zone — a 12-km stretch that has 86 hotels cheek by jowl along a narrow sandbar strip that look out on a brilliant aquamarine blue oceanfront and an almost sugar-white beach on one side and a lagoon on the other — is about $120 a night. Further away, you can get rooms for about $60 but without a great oceanfront view or a private beach.

“There are 20,000 rooms in Cancun and real estate development in the area is quick. We will be up to 500,000 in next to no time,” says Thoman, with most of the investment here flowing in from the US.

Slack season or not, the occupancy rate in Cancun hotels is over 80 per cent and Thoman reckons that after the trade negotiators, the NGOs and the large tribe of journalists disappear after the four-day conference, there will be others to fill up the place.

But that’s no use for Thoman — they are still the poor guys who can’t afford to plonk down the $ 400,000 that Punta Cancun, the real estate company developing the beachfront property, is asking for the condos.

Thoman isn’t the only investor here who is chafing at the bit over tariffs and regulations in Mexico. Narendra Singh Kang, who is originally from Chandigarh, runs an Indian restaurant called the Taj Mahal in the downtown area. It isn’t an upscale restaurant that can match the haute cuisine joints in the hotel zone, but it is about the only place where you can get some dodgy Indian food.

Kang, who came here from Austin, Texas, 20 years ago to manage a hotel before branching out on his own, says the place has grown phenomenally since the area was first developed in the mid-70s by cutting a swathe through the deep tropical forest and the mangrove swamps where the iguanas prowl.

Both Thoman and Kang are investors — one big and one small — but both have only a dim idea of the process that the trade negotiators use to reach consensus on creating a world that is free from regulation and import barriers. They only suffer the consequences of a badly laid-out set of trade regulations.

Investment in the three-room condos here makes good economic sense. “You can give out the rooms on rent — that’s what the US investors will do — for around $ 400 a day. Factor in a conservative occupancy rate of 100 days a year and you earn $ 40,000 a year, which is a 10 per cent return on investment,” says Thoman.

Interest rates are down all over the world, including India and a 10 per cent return looks like a good business proposition.

There’s only one catch: investors from abroad will have to vest the title to property with a bank trust. Those are the Mexican rules.

Investment is one of the biggest no-no subjects for the Group of 22 — a club of developing nations that has been stalling progress on the so-called Singapore issues, which include investment, competition policy, trade facilitation and transparency on government procurement.

“Here,” says Thoman shoving a Punta Cancun brochure towards me, “you go and sell my condos to investors in India and you can keep a part of the commission”.

This week I have bumped into far too many people who’ve been sporting twin hats — sombreros if you are Mexican: journalists concealing NGO affiliations, NGO officials masquerading as journalists, academics of various stripes consorting with various pressure groups.

I am tempted to take up Thoman’s offer — but don’t rat on me to my editor. The terms of my employment do not allow it.

Meanwhile, let me head across the road to the convention centre and file my story for the day.

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