Wealthy Mexicans Either Flee to Miami Or Send Money Overseas

RIO DE JANEIRO, BRAZIL – Two years after his campaign to fight rampant tax evasion and corruption in Mexico, President Andrés Manuel López Obrador is spooking the wealthy, who are now sending money abroad.

The first signs of this capital flight date back to the period before López Obrador’s victory in the 2018 elections, and have increased since the Mexican president implemented new laws against tax evasion late last year, according to interviews with managers, tax consultants, and bankers.

Now, the president’s response to the pandemic – where he has refused to provide fiscal incentives to sustain the economy and has intensified rhetorical attacks on wealthy Mexicans linked to past administrations – has added to the outflow.

“The phone keeps ringing with calls from Mexico,” said Philippe Stiernon, founder of Miami-based ROAM Capital, which helps US private equity companies raise funds in Latin America. “Every day you hear about a new Mexican family moving to Miami.”

Although much of the evidence is based on reports, there are several data that highlight the extent of this trend: Mexicans placed nearly four times more resources in portfolios abroad last year than in 2018; property prices in wealthy neighborhoods of the capital dropped this year; and domestic investment fell in 17 of the past 18 months – an alarming trend for an economy that will need capital to bounce back from the virus.

In many ways, López Obrador’s crusade makes sense. Mexico is one of the most corrupt and unequal countries in the world and has the lowest tax collection rate of all 37 nations of the Organization for Economic Cooperation and Development (OEDC).

People have been reluctant to discuss their concerns, but asset consultants say the concern is not so much that their wealthy clients will have to pay higher taxes, but that the president will use the campaign to target them unfairly.

“Some of my clients were big supporters of the opposition,” said David Lesperance, a Polish tax and immigration consultant who helps wealthy individuals flee regimes that target their fortunes. “They are concerned about the president’s attack dog reprisals” at the country’s tax agency.

The press office of López Obrador failed to comment, as did the Treasury Department.

Source: Bloomberg