Laredo Cashes In on Swarm of Smugglers From Mexico : Trade: Overvalued peso helps create bargains that can be spirited across the border and sold at a high markup.


While most of the nation is suffering through a recession-plagued holiday season, business is booming in--of all places--this border city, one of America’s poorest metropolitan areas.

Shoppers wheel dollies stacked with merchandise down Convent Street, the main drag extending from the bridge spanning the Rio Grande. Customers snatch electric mixers off the floor at Lazaro’s electronics store as quickly as harried stock clerks can put them out.

Storefronts packed with clothes, videocassette recorders and gadgets from the Far East fill a 10-square-block area between the circular Howard Johnson’s tower and the Spanish-style La Posada Hotel. The city’s Riverdrive Mall has expanded three times in six years.

In fact, per capita retail sales here are among the highest in the United States--$11,619 for every resident, according to Laredo State University.


That’s because the shoppers who walk down the streets of Laredo are not Americans. They are Mexicans. And they are not just gift-shopping for their families and friends.

Most are small-scale smugglers who, in this boom year for Mexico’s economy, are using overvalued pesos to scoop up merchandise that they will sneak back across the border and sell for a healthy markup on Mexico City’s sidewalks.

Despite Mexico’s highly publicized rollbacks in tariffs and import controls, Mexicans still prefer to buy in the United States. The wealthy fly to Houston or Dallas for a weekend shopping spree, but Mexico City’s working class settles for the 15-hour bus ride to Laredo, the entry point for one-third of all Mexico’s imports.

Sheri Alba, property manager at the 68-store Riverdrive Mall, estimates that 65% to 70% of its customers are Mexicans from as far away as their capital. Spanish-language banners stretched across the mall’s walkways advise that stores will stay open late Dec. 12 to Jan. 5, the traditional Mexican Christmas shopping season, which ends the day before the three wise men supposedly arrived in Bethlehem bearing gifts.


Downtown, an even greater percentage of the shoppers are Mexican. They find a city that is a cross between an off-price shop and a buyers showroom. Discontinued models of television sets fill shelves--with dozens more in the storage room--and racks dip from the weight of hangers holding last year’s fashions at bargain prices.

With goods selling for one-half to one-third what they cost in Mexico City stores, this is paradise for the chiveras-- literally goatherds, but more to the point, small-scale smugglers--that are the lifeblood of Laredo retailing.

At one downtown store crowded with merchandise, a female shopper pulls sweaters out of cardboard boxes without checking the sizes and stacks them on the counter. As the salesclerk rings up her purchases, the shopper pulls off the price tags and stuffs the sweaters into a yard-high backpack.

When asked what she will do with so many sweaters, the woman just smiles. Like most chiveras, she is financing her own shopping by filling orders from friends and relatives. Regulars run retail businesses from their homes; others are sidewalk vendors.


At Hong Kong Imports, all the products have two prices--one for a single item and another 20% lower for bulk purchases.

Merchants say those bulk sales have not been affected by Mexican authorities’ latest efforts to clamp down on smuggling.

Last month, the Mexican Treasury Ministry, which is in charge of customs, replaced nearly all of its 3,000 customs agents on the border and at major airports with better educated, better paid “untouchables"--who will be rotated regularly to keep them untouchable.

This comes after two years of struggle against notorious corruption in the Mexican customs service.


In Laredo, the corruption was evident in the small tip--$10 or so--that chiveras paid Mexican customs agents when they crossed the international bridge into Nuevo Laredo, Mexico. Customs agents had become so used to this extra income that open rebellion broke out when the Treasury Ministry announced reforms two years ago.

Initially, the Treasury Ministry set up a system of computerized traffic lights to decide who would be inspected: Travelers press a button, and a green light passes most through without inspection, while about 10% get a red light.

No longer, in other words, would a bribe determine who crosses the border uninspected.

“Discretion is the key to corruption,” explained one high-ranking customs official who spoke on the condition he would not be identified. “By taking away the agents’ discretion, we eliminated the reason for bribes.”


The system was so unpopular among customs agents that on the day it was introduced, they switched the light bulbs. Nine out of 10 travelers got a red light, causing long delays. When Mexican Secretary of Finance Pedro Aspe Armella passed through customs at an airport last summer, agents booed him.

But the crackdown worked. Since the lights were introduced at the Mexico City airport, the amount of import duties collected has doubled, while the number of transactions has remained steady. “Before, that money was going into someone’s pocket,” the Mexican customs official said.

Simultaneously, customs officials took on the notorious Nuevo Laredo crossing. “If we could make the system work at Nuevo Laredo, it would work anyplace,” the official said.

Here, too, there was resistance. Agents poured soft drinks into the computer, then dropped it. With the system on the blink, they went back to random inspections and the accompanying bribes--until a call from Mexico City ordered them to let everyone through without inspection until a new computer arrived.


This summer, an exasperated Aspe finally gave the agents an ultimatum--shape up or be fired. He replaced them last month with new agents who--because they make six times as much--are expected to be more interested in keeping their jobs than in collecting bribes.

But the shopping--and, by extension, the smuggling--continues.

In fact, the only proven way to stop Mexicans from buying in Laredo is a major peso devaluation. In 1982, when the Mexican currency’s value dropped 85%, Mexicans could not afford to buy here. That Christmas, over half the shops in Riverdrive Mall were empty. For the first time anyone could remember, stores on Convent Street were closed and sold. Laredo only began to recover two years ago.

But the recovery, under stricter Mexican customs surveillance, has required some adjustments.


Clerks in electronics stores say they no longer deliver to Mexico--a contrast to a decade ago, when every Convent Street shop had its own chivera . Most electronics wholesale shopping is done by telephone these days, and customers take care of their own export arrangements, often using airplanes and covert landing strips rather than land crossings.

The changes have also cut out a whole middle level of smugglers--people who cannot afford airborne transport, but who did too big a volume to try to hide their purchases.

Small-scale smugglers have benefited, however.

With only 1-in-10 odds of being caught, they take their chances--and no longer have to pay bribes.


“It has made it harder for people to buy in bulk and take it across (the border),” Alba said. “But no matter what the obstacles, there is always some way to get what they want and get it across.”

Purse shop owner Allen H. Kim agreed that sales have risen, despite efforts to tighten the bridge crossing.

As he spoke, a customer bought a dozen identical purses and stuffed them into a suitcase. Kim rang up the sale without batting an eye.