the dollar vigilante blog

Freedom: A Moving Target (Reflections From A Dozen Years In Mexico)

[Editors Note: The following post is by TDV legal correspondent, Jim Karger]

I love living in Mexico. The “live and let live” culture here works for me. When I arrived a dozen years ago, I felt free. I felt the joy of being left alone, of not fearing making an inadvertent mistake that might cost my money or my freedom. Except for physical violence, there wasn't much that was really prohibited here.

Most of Mexico's laws at that time fell under the headings of "Suggested" or "Optional." Government in Mexico seemingly could get nothing done, and for the most part didn't try. Government here reminded me of the Keystone Cops, totally incompetent but who knew they needed to look busy and so stamped papers with their "official" imprimaturs, usually many times. The only exception was CFE, the government-owned electric company. If you failed to pay your electric bill, they would show up and physically disconnect the power line to your home until you paid up. Then, at some point, they would come and reconnect you.

The Mexican government seemingly had no interest in what you drank or smoked, how much, or even where. They shared none of the US government’s stated objectives to spy, monitor, debase currency, or fight unnecessary foreign wars. Like all governments they stole with impunity, but since most bureaucrats here couldn't find the doors to their own offices, they could take a few pesos here and there but had no chance tapping into, or even finding, the real money flows.

Being twenty-one years old to get into a bar was, well, a suggestion, one laughed off with impunity. Dogs in restaurants were, if not welcomed, common, as long as they didn't take a dump on the floor. Expired license plates, or no license plates, were, well, as common as license plates. Seat belts should have been a delete option on cars here since no one wore them. Credit cards were handy, but unnecessary, since almost everything, was purchased with cash, pesos or dollars, which interestingly are termed "effectivo" in Mexico if for no other reason than cash was always effective. Few I knew paid income taxes. The federal government here had to rely on "IVA," the 16% value-added tax collected on the sale of most goods, while local governments seemed to do what they did (which was not much) with the meager real property taxes collected each year.

Anarchy it wasn't but it was close enough to feel free.

But that was then and this is now. In the dozen years I have lived here, which often seems only two or three in the rearview mirror, much has changed, and most of those changes have come at the hand of government.

In today's Mexico, cash is no longer king. Indeed, Mexico's recently-enacted capital control laws prohibit the exchange of more than $300 US dollars-a-day. And banks here now must ask, and you must certify, the source of wired funds into a Mexican bank account.

Mexico, like most other countries, has rolled over and agreed to be an agent of the US Internal Revenue Service as required by FATCA, a crude, hubristic institutionalized extortion plot by the only industrialized state in the world that taxes its non-resident citizens on foreign source income, another in a long list of threats by its thuggish cash-strapped northern neighbor that displays the attitude of a pit bull on a gunpowder diet. Unfortunately, Mexico has in large part hitched its wagon to the falling star north of the border and is seemingly mute when it comes to seriously contesting even the most outrageous violations of its sovereignty, e.g., Fast and Furious.

"Mordidas," what some would call "bribes," and that others (like me) call "propinas" which means "tips," were once commonplace. Traffic violations were almost always settled by paying the "multa" (fine) to the police officer who would dutifully promise to take it himself to the court offices and pay it for you, immediately before he ripped up your ticket and pocketed the money. The system was, in a word, efficient. And, for the most part "tips" still work. A friend recently got a Mexican driver's license without the red tape of a written exam, driver's test, or physical examination. Actually, that is not completely true. His written test was taken by one of the good and friendly employees of the driver's license bureau and he was pleased to report that he scored 27 out of 30 on questions he could neither read nor understand. But today with a highly-publicized federal campaign to stop "mordidas," one must now be very careful to whom a "tip" is offered for fear of being imprisoned for bribery, if not by Mexico then by the United States if one is a US citizen. See "Foreign Corrupt Practices Act."

Cars registered in other countries now must be "nationalized" by permanent residents of Mexico, which means paying sales tax on a car on which you already paid sales tax to your former state. I just finished that process — two days of relentless government bullshit and that was two full days with a paid fixer. I am confident that no one without help or knowing the right person inside the Mexican government could walk that minefield without exiting on their knees.

Notarios, quasi-public officials that must legally approve many transactions, including every real estate sale, have been threatened with heinous penalties by the Mexican government should they permit any land transactions to be settled in cash and are now required to report every transaction to Hacienda, Mexico's IRS that, like its US counterpart has aspirations of collecting (at the end of a gun) everything it needs, everything it wants.

Most cars can no longer be purchased with cash. Neither can precious metals over small amounts, among other things the Mexican government would like to track and tax.

Most disturbingly, I recently saw a Mexican bar carding younger customers. I wept openly.

What's next? More taxes, of course. Proposed by Mexico's President Nieto are such insanities as a 16% IVA tax on the sale of real estate, including one's home. Expressed rationale? A direct wealth transfer to the poor from the not-so-poor after it passes through the pockets of the political class. If this law is passed, it will stomp a slowly recovering real estate market like a narc at a biker rally. Thousands will be thrown out of work, to include (poor) construction workers who can then thank government for the peanuts they will receive in place of their jobs. There was even talk of an IVA tax on food, as if the poor can afford one more peso for their dietary staples. After that was declared dead on arrival, the proposal was revised to tax "pet" food on the theory that only the rich can afford pets and the rich can afford to pay tax on their dogs' food, which only proves just how out of touch Mexico's political class really is.

After that, who knows? My guess is they will tax prostitution which still thrives here. What tax and spend governments cannot tolerate are cash businesses that can evade the taxation/theft net. To date that hasn't happened, but the directive is clear: if it moves or breathes, tax it. And now, with computers, even bureaucrats who can't find their own offices can find the money. Mexico is taking its turn at moving toward full-bore statism.

That said, I don't want to overstate the case. Compared to the violent police states to the north, Mexico's humble incursions to seize control of its tax donkeys may seem rather mild, but from the perspective of one who has actually been free, even if for a relatively brief moment in time, the changes are significant and disturbing.

The taste of freedom, like good tequila or the waft of a fine perfume, is unforgettable.

Freedom is addictive. I am an addict and will always need a fix. I don't want a 12-step program. I want the drug itself. I want freedom.

Moving to Mexico was one of the best decisions I have ever made. Staying here, however, could prove to be problematic depending on ever-changing circumstances, government and its increasing limits on freedom, which in large part depends on how Mexico responds to the neighborhood bully who lives next door and whether it elects to become a "first-world country," which translated means "police state."

The lesson I take away from this experience and transition is to never become emotionally-invested in any decision, specifically including decisions involving one's geography. A good decision can become a bad decision, thus requiring frequent revisits to weigh one's fundamental rationale for leaving and whether, and at what point, changing realities leave that rationale unserved.

For now, Mexico still feels right.

[Editor's Note: Proximity -- or rather the lack of it -- to the US is going to matter in coming years. That's why as much as we love Mexico, we looked farther south for a home for our community of like-minded, liberty-loving individuals. Chile isn't just a beautiful country with arguably the soundest economy on earth; it's also geographically remote and as far away as you can get from the US in Latin America. Take a trip to explore Galt's Gulch, Chile to see all Chile and the Gulch have to offer. Click here to learn more.]

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