BAJA CALIFORNIA.- The 2015 annual Global Retirement Index announcing the world's best retirement destinations has just been released by International Living Magazine, and Mexico has climbed from seventh place to third in the yearly world rankings. This comes as a surprise to many living in the Northern Baja corridor between Ensenada and Tijuana.

Categories considered in making the 2015 decision included: access to health care; climate; quality of life; cultural amenities; natural beauty; relaxed pace; opportunity for sports and entertainment; ease of integration into the local community; and low overall cost-of-living expenses. Using these criteria, a comprehensive list was drawn-up culled from multiple information resources, including feedback from more than 16,000 expat retirees of all nationalities worldwide.

The top locations, judged to be the best all-round retirement destinations on the planet, were not merely those that gave the best bang-for-the buck. Safety, security, peace-of-mind, and a rich opportunity for personal fulfillment were equally important, although the financial bottom line was absolutely crucial.

And the winner is? Ecuador — a South American nation about the size of Arizona

Zeroing-in even further, the best city to live in Ecuador is judged to be Cuenca, an old Spanish colonial and University town and World Heritage Site of just under half a million population, located in the highlands of Ecuador, approximately 2,500 meters above sea level. Last year's winner, Panama, which offers retiree expats the advantages of the world's best retirement program (the Pensionado visa) finished second.

But the biggest surprise of all was Mexico, which jumped all the way from seventh place to Number Three. How can this be? — Locals ask — who are being squeezed by federal government on both sides of the border and by onerous, newly-initiated bank transaction and money-changing charges and restrictions.

In a complete list of the top 25 retirement destinations, and their comparative virtues, it is interesting that four of the top five destinations are Spanish-speaking countries.

Although Mexico's Number Three ranking may justify the wisdom of many local expats, retirees, pensioners, and those on fixed incomes who decided to retire at some point in their lives to Northern Baja, it is unfortunately cold comfort when faced with rising expenditures in the form of increased IVA taxes from 11% to 16% and exorbitant new U.S. banking charges of 3% on all ATM transactions and new regulations concerning currency conversion due to money laundering concerns. Thus the cost of the drug war reaches into the wallets of ordinary citizens attempting to go about their business.

Furthermore, for those earning pesos on the Mexican economy the harsh realities are exacerbated further by a plunging peso due in part to the fall of the price of oil on the international market, Mexico's biggest source of revenue.

For this article, numerous expats and Mexican nationals were interviewed. Resourceful bi-nationals and expats on fixed budgets, particularly those locals with California ties, have decided to get off the U.S. grid as much as possible:

Many have sold all U.S. assets and made themselves debt-free. Many others have gotten-rid of their U.S.-based health insurance and use local Mexican doctors annexed to pharmacies. Other economies include no mortgage, no monthly subscriptions, no cable TV, no cell phone plan, no country club or other dues. Skype and Email are used to communicate.

Many have cancelled their U.S. car insurance and drive only in Mexico, or pay an occasional daily insurance rate to cross into the U.S. for business, shopping and entertainment on rare occasions.

To avoid banking transaction costs, many Baja locals who receive monthly direct deposits via Social Security or investment income cross the border each month to withdraw the entire amount in dollars. If the amount is $1,000 the amount saved is more than $30 in transaction fees. While those who earn money in dollars can take advantage of the exchange rates through arbitrage, conversely, those whose incomes are in pesos have found it advantageous to buy dollars in Tijuana and exchange them for pesos in San Ysidro due to exchange rate differentials: a process known by economists as "Currency Triangulation".

[/p]

While you are in the U.S., you can fill up the tank with gas. and pay cash at motivated stations and save another $20 with the knowledge that the practice of "skimming" is unlikely compared to the notoriously unregulated Pemex stations in Mexico. Then do some targeted shopping in U.S. stores and save another $100 or more. Locals have learned to know which items are cheaper on which side of the border and make the best of both worlds.

But no question about it, the dollars, or pesos, are definitely not going as far as they were just 18 months ago and everyone living in Northern Baja on a fixed income is feeling the pinch. The worst financial bludgeoning, of course, has been the increase in the value-added tax, the IVA, from 11% to 16 % on all sales.

No one can escape it and absolutely no one likes it.[/p]

It is registered every day at the gas pump or at the check-out counter and it has created a huge disruption within the Tijuana economy. The IVA increase has taken a bitter toll on local Tijuana businesses large and small. Vacant storefronts are everywhere.

According to Victor Laguna Ruiz, President of the Association of Businesses of the Zona Este de Tijuana, more than 30% of the local businesses have closed as a direct result of the increase in IVA.

This is because the federal government of Mexico does not take into consideration the fact that Tijuana, and other border cities, cannot be compared to mainland Mexico.[/p]

Unlike such Mexican retirement destinations as San Miguel de Allende, Lake Chapala, and Puerto Vallarta, the border communities are forced to compete with California, Arizona and Texas, which have outlet stores, swap meets, economies of scale and much lower sales taxes.

The unintended consequences of this IVA tax increase are that everybody loses.

And with shortened wait-times at the San Ysidro border crossing, more locals than ever are day-tripping across the border to take advantage of lower prices, more favorable exchange rates, and gas prices.

In spite of all this, Mexico still has a lot going for it. The thousands of miles of pristine beaches, great cuisine, friendly hospitality, rich culture and a large, diverse country have been sufficient, so far, to lure retirees from all over the world to spend their "golden years" living within its confines.Baja Beach communities are still a great bargain for renters and buyers, and property taxes are low. No mass exodus to more favorable climes has occurred.

Not yet.

But there is a tipping point and it may come soon.

More Americans live in Mexico than in any other country of the world. Many are not affluent. Many retirees from around the world cannot afford to live in their own countries and have come here out of financial necessity. But their presence in Mexico should not be taken for granted. Exotic destinations such as Ecuador, Panama, Malaysia and Thailand are only a plane ride away and are beckoning retirees with open arms to re-locate and take advantage of financial incentives beyond anything Mexico has to offer.

borderzonie@gmail.com

@borderzonie