In Baja, a Beach Boom by U.S. Buyers

Along a curving white-sand bay framed by austere desert mountains, the billboards for the beachfront condos proclaim “Act Now--Only 42 Available” and “Location, Location, Location.”

The signs aren’t in Spanish. They are in plain realtor’s English.

Although the Mexican Constitution forbids foreigners to directly own land within 30 miles of the coast, they can hold it through trusts. And English is the preferred language for pushing these home sites 800 miles south of the U.S. border, at the southern tip of the Baja California peninsula.

The newcomers may not speak much Spanish, but they have created a booming high-end tourist trade complete with million-dollar getaway homes, glitzy time-share complexes and some of the world’s priciest hotels--bringing thousands of new jobs to what was one of Mexico’s poorest backwaters just 20 years ago.

The number of foreign visitors to Baja California Sur, 87% of them American, topped 1 million last year for the first time. Los Cabos, the southernmost county, has doubled in population in the 1990s to 75,000, including several thousand Americans, and is projected to triple that figure in the next 25 years.

This stream of Americans south to Baja Sur--the southern half of the peninsula--and other coastal resorts is a kind of cultural flip side to the flow of Mexicans heading north each year to live and work in the United States. And just as the northward flow has changed America, the arrival of so many Americans is bringing equally dramatic changes to life in Mexico’s youngest, least populous state.

Most Baja Sur residents appear to embrace the Americans, saying they bring investment and much-needed expertise without which the state would have remained a poor desert with a handful of peasant ranchers.

Ramon Salido, the state’s economic development minister, notes that tourism contributed an estimated $450 million to Baja Sur’s economy in 1998--more than double the dollar amount six years earlier.

“How great that investment is coming here--and let it keep coming,” Salido said. “The investors are very committed to the community, and they are joining the efforts to improve living conditions in the urban areas.”

But others aren’t so sure. Some complain that the Americans have created a gated world, keeping the best new jobs for themselves, denying Mexicans access to their own beaches and making the gap between rich and poor more glaring than ever.

With a dash of hyperbole, a few politicians and academics even wonder whether the torrent of Americans may be opening the front door to U.S. ambitions, voiced from time to time over the last 200 years, to make Baja California a fully American appendage.

“We have to admit with astonishment that the ghosts of the Austin family are prowling around Baja, and the Texas phenomenon looms in a more and more insidious manner each day,” wrote independent Sen. Adolfo Aguilar Zinser in a recent opinion column.

Aguilar Zinser was recalling the Mexican government’s Texas land grant in 1823 to pioneer Stephen Austin, which attracted thousands of American settlers to Texas. That led finally to the U.S. annexation in 1848 of not only Texas but the rest of the Southwest--upper California included.

Love-Hate Nature of U.S.-Mexican Ties

Sentiments like Aguilar Zinser’s, laced with such sharply etched historical memories, reflect the complexities of the love-hate U.S.-Mexican relationship at the end of the century.

The larger fear is that the most precious coastal assets are being gobbled up by Americans in a buying frenzy that exploits Mexico’s free-market reforms of the 1990s and preys on an enfeebled domestic economy.

Maria Luisa Cabral Bowling, a professor at the Autonomous University of Baja California Sur in La Paz, estimates that Baja Sur is the site of one-fourth of the roughly 15,000 land trusts in Mexico.

The trust is the device through which foreigners may acquire 50-year rights to land within 30 miles of the coast or 60 miles of the border--a step short of ownership, which would be unconstitutional. Bowling calculates that 20% of the whole Baja peninsula coast is now held in trusts for foreigners.

“The concern is not that the Americans are here but that, in some future conflict, the United States could use the presence of so many U.S. citizens here to intervene on their behalf,” she said. “Since 1822, there have been constant threats and pressures from the United States over the peninsula.”

As Aguilar Zinser sees it, the threat is no longer military but economic.

“Not so silently,” he wrote in Mexico City’s Reforma newspaper, “a formidable process of colonization is on the march [in Baja Sur], carried out by a multitude of Americans who are not necessarily part of a geopolitical design hatched in Washington but who are taking possession of the best lands the length of both coasts of the peninsula.”

Baja Sur Gov. Guillermo Mercado Romero responded that such complaints come from uninformed politicians trying to stir up conflict. He said the laws governing fideicomisos, as trusts are known in Spanish, are strictly observed to avoid any threat to Mexican sovereignty.

“The relations [between Mexicans and Americans] are good, there are no conflicts,” Mercado said in an interview. “The people know these are healthy investments, and they know they generate jobs, that they generate a dynamic for the state that is positive.”

Mercado did acknowledge that people now see tremendous disparities between the new wealth and their own humble barrios, with inadequate water and sewer systems and unpaved streets. “This is the greatest challenge facing the state--to reduce the imbalances and inequalities,” he said.

Yet while a local magazine, La Tijereta, wrote recently about “the silent invasion” of foreigners, the reality is that most of the biggest investments are being made not by Americans but by Mexican entrepreneurs and corporations, often in partnership with foreigners.

Pablo Gutierrez of ProCabos Consulting, an independent firm, noted: “Years ago, Mexican millionaires used to take their money out of the country. It’s a relief that these wealthy Mexicans are now investing it here in Los Cabos.”

ProCabos estimates that the region’s mega-projects could be worth up to $3 billion over the next two decades. The showcase is the 1,800-acre Cabo del Sol development.

Development to Include Golf Courses

Owned jointly by Mexico’s Grupo ICA construction conglomerate and Donald M. Koll, the Orange County real estate mogul who is the pioneer American investor in Los Cabos, Cabo del Sol is planned to ultimately have three world-class golf courses and four hotels with 2,000 rooms in all, 900 houses and 850 condos.

Not least, it is expected to employ about 3,000 people, nearly all of them Mexican.

Mexican President Ernesto Zedillo, on a recent visit, applauded such development but stressed: “What matters to me, what is most important, is how do the people live who are working in these hotels? We Mexicans want to ensure that, besides the luxury hotels, there are also decent worker neighborhoods.”

While Los Cabos is sprouting dusty worker enclaves, conditions appear somewhat better than in many parts of Mexico. The county and state governments are building schools and installing sewer and water systems in a race to keep pace with the growth.

American retirees and vacationers have long been a fixture in northern Baja California as they have spread from San Diego south into Tijuana and surrounding towns. The explosion of U.S.-driven growth in Baja California Sur is more recent.

Created in 1974, Baja Sur grew up around its small free-port capital, La Paz, on the eastern coast. But the real jewel has turned out to be the county of Los Cabos, including the 20-mile coastal corridor from the quiet town of San Jose del Cabo to the boom village of Cabo San Lucas, which overlooks the spectacular rocky tip of Baja.

In the early 1970s, the Mexican government earmarked Los Cabos, then a remote fishing paradise accessible only by private plane or boat, to become a major tourist development. The trans-peninsular highway opened in 1973, connecting Tijuana with La Paz and Los Cabos. The goal: to make Los Cabos a world-class fishing and golfing resort, with cactus-studded courses stretching down to the sea as the prime draw for hotels, condos and beachfront mansions.

It has worked--some might say too well, given the recent Cancun-style development in Cabo San Lucas, complete with Planet Hollywood and streets lined with T-shirt stands. The colonial-era town of San Jose del Cabo is less gaudy, though English also prevails. Between the two towns, the $600-a-night hotels are scattered discreetly in coves along the oceanside corridor. The Los Cabos airport has become the second-busiest beach resort airport in Mexico after Cancun’s.

‘Tourist Offerings Very Americanized’

Baja Sur tourism director Gustavo Farias Noyola worried that “the tourist offerings in Los Cabos are very Americanized, [and] this is bad for the destination in the long term. . . . I feel that we lack a bit of strength in the conservation of Mexican traditions and culture.”

He said the growth strategy, given the fragile desert ecology and pressures on resources such as water, is to go for the luxury tourism market and “to have fewer tourists who spend more.”

But Lourdes Orduno, a legislator for the center-right National Action Party, said that Americans are taking the prime jobs in areas such as carpentry, boating and real estate, sometimes without work visas, and that “Mexican labor is being displaced by foreign workers.”

“We Mexicans are being displaced from our lands because investors can pay more,” Orduno also said. “Foreigners who come as tourists, who invest, who observe the laws are welcome, because this generates income and hard currency for Los Cabos. . . . But we are not applying the laws correctly and fairly ourselves.”

The degree of fairness is hard to measure. Costs in Los Cabos are high, since so much is imported, but competition for labor has pushed up salaries as well, said ProCabos Consulting partner Mauricio Montes de Oca. This pay scale has attracted thousands of migrant workers from across Mexico.

“A maid here earns $70 to $100 a week. Where else does that happen in Mexico? A servant here earns what a secretary earns in Mexico City,” he said.

And while some Americans have built up businesses that live off the tourism industry, they are also creating jobs and sharing skills. Brian Buckingham, a cabinetmaker from San Francisco, settled here seven years ago to do high-end woodwork in new million-dollar homes. He now employs 26 Mexicans who are learning to do top-quality woodworking.

Joint Initiatives Have Begun to Pay Off

Some joint initiatives by Mexican and American investors also have begun to pay off for the region. The developers association created an unofficial levy of 1.3% of sales to help pay for the widening of the 20-mile highway from San Jose del Cabo to Cabo San Lucas from two lanes to four, dramatically improving travel in the region and opening up new development opportunities.

Alberto Villada, the ICA corporation’s executive in charge of the Cabo del Sol project, said the developers association is helping the county government improve its urban planning and has proposed an additional 1% sales levy to help pay for infrastructure in worker residential areas.

Leticia Diaz Rivera’s visionary father bought 400 acres of prime hillside in the mid-1970s and developed the community of Pedregal, overlooking Cabo San Lucas, where houses go for $150,000 to $4 million.

She said that some Americans have integrated into the community and that some have settled permanently and taken Mexican citizenship.

“It is ridiculous to think anyone opposes American investment. It is creating sources of work and real growth. That’s something you probably hear in Mexico City,” she scoffed.

* DIFFERENT DISPUTE: Rosarito residents from the U.S. clash with Mexican developers who want them out. A3