Frontera NorteSur

Not too long ago, Dyviam Romay and David Luna were busy selling fine furnishings to second-home buying foreigners who were snatching up properties in Puerto Vallarta, Jalisco.

An internationally-known interior designer, Luna’s gift of creating culturally blended home environments kept local store manager Romay with plenty of things to do during the work-day. Then the bottom fell out from under the vacation home market, as well as tourism in general in Puerto Vallarta.

After 30 years of residence in the Pacific Coast port, Romay assessed 2009  as an exceptionally awful year. “We have never had a year like last year,” sighed Romay, who once helped design the popular Aca Joe clothing line in Los Angeles.

To augment a diminishing income, Romay resolved to do something different in 2010. Looking around Puerto Vallarta’s Old Town section, Romay realized there was little late-day food besides tacos, pizza and chicken. So the daughter of Mexico City open-ed up El Rincon de la Papa, The Potato Corner.

Nestled in a narrow storefront near a busy intersection, Romay and her small work crew prepare gourmet-like baked potatoes. One recipe offers a potato topped with traditional Mexican pollo pibil, while another, Hawaiian baked potato, comes with pineapple, turkey and green pepper. A creative spirit, Romay even makes potato lasagna and spud-based chocolate cake. I’m throwing everything behind this,” Romay said one evening. “I’d like to live off this, because I love cooking. Cooking is like magic.”

With business at The Potato Corner off to a slow start, Romay acknowledged it will take time to accustom locals to the culinary wonders of the baked potato. Nonetheless, Romay judged she had a small window of opportunity during the winter high season when many potato-craving foreign visitors come to town. “I had to take my chance.” she insisted.

Romay’s economic situation is a common one in Puerto Vallarta.

A look at the latest statistics reported in the Mexican press gives an overview of the depth of the crisis afflicting a resort city of more than 300,000 people that became Mexico’s second tourist destination after Cancun in recent years.

In 2009, 635.000 less air passengers touched ground in Puerto Vallarta than in the year before. At the same time, 92 fewer cruise ships made port calls than in 2008. Overall, tourism was down 6 percent from the previous year. And 2010 did not begin on a good foot. For the first two weeks of January, hotel occupancy rates averaged 60.54 percent, compared with 64.58 percent reported during the same time period in 2009, which was a year when tourism was well into a historic plunge.

The crisis is evident in the travel agency business, or at least what remains of it. Normally, it is easy to purchase a bus ticket in downtown Puerto Vallarta for long-distance travel elsewhere in the country. On a recent day, however, the task proved impossible.

A well-established downtown travel agency that once did a respectable business now closes its doors at 2 pm and does not reopen in the late afternoon as was previously the case. At another agency hidden away in an Internet café in the hip Olas Altas district, the ticket clerk twice failed to show up at indicated times. At yet another business several blocks away, the door was shuttered with a “Back at 3:30” message that had been posted for days.

Luckily, tickets were plentiful at the bus station.

Pick-Pocket Cops

If Puerto Vallarta’s residents did not have enough to worry about just in terms of keeping themselves honestly employed and happily fed, another concern has cropped up – public insecurity. Although the popular tourist resort has largely escaped the narco-violence which is ripping apart other parts of Mexico, some worry that Puerto Vallarta could also go to hell in a hand-basket.

Washington and Mexico City speak frequently about the “co-responsibility” of fighting organized crime across their common border.

For 2009, the local press reported at least 19 narco-style executions in Puerto Vallarta; the number is approximate to a day or two’s death toll in Ciudad Juarez. Part of the violence could be related to the penetration of members of the Zetas crime gang in a “plaza” long dominated by rival Joaquin “Chapo” Guzman.

Yet public safety concerns are also directed at the police, including the heavily-armed state police units that periodically roam the port in convoys of 5 or 6 vehicles. During the last two months, several complaints have been filed with the Jalisco State Human Rights Commission charging state cops with illegal searches and robberies.

In another recent case, a Puerto Vallarta resident accused state police of busting into her apartment while she was at work, drawing guns on small children and stealing money and jewelry.

On a January visit to Puerto Vallarta, Jalisco State Secretary of Public Security Luis Carlos Najeras Gutierrez said he doubted officers were involved in the incident. Instead, Najeras suggested armed civilians dressed up like police could be the responsible party.

Lately, there has been a rash of reports of municipal police shaking down both tourists and Mexican nationals during traffic and pedestrian stops. In the latter instances, police are accused of halting pedestrians late at night or early in the morning in the Old Town section of the city. Typically, pedestrians are then asked to undergo a “routine search” before being released-minus the money in their pocket.

Complaints of the shake-downs reached the ears of US consular agent in Puerto Vall-ata, Kelly Trainor, who then passed on the information to the US Consulate in Guadalajara.

“It’s got high-level attention from our counsel general,” said Christopher Teal, spokesman for the Consulate. On January 25, Counsel General Daniel F. Keller met with new Puerto Vallarta Mayor Salvador Gonzalez to express official US concern about the reports.

According to Teal, Puerto Vallarta’s mayor pledged to follow up on the controversy. The US official told Frontera NorteSur that no special travel advisories were in the works for Puerto Vallarta, but urged visitors to “be aware of their surroundings.”

According to the Gonzalez administration, 60 transit police and 326 street cops earn about $600 per month. Puerto Vallarta, it should be noted, is one of the most expensive places to live in Mexico.

Acapulco on a Bad Credit Card

Puerto Vallarta’s trying times should be understood within the context of rapid over-development, real estate boom and bust, global recession and suspected public corruption. For years, many old-timers have warned that Puerto Vallarta was in danger of becoming overbuilt, congested and polluted like Acapulco. And like Acapulco, residents now have to endure a fleet of old rickety city buses, many of which speed through the streets, run red lights, and even trample pedestrians. On a recent afternoon, tourists near the Malecon watched as a woman lay immobilized on the street after falling off one of the privately-operated vehicles. For the privilege of riding with an often reckless driver, residents and visitors alike were slapped with a one peso fare increase in January.

Sometimes towering above previously established legal height limits, condominiums popped up almost everywhere in the last decade. Today, thousands of properties are unoccupied or for sale. On the road to the airport, darkness blankets several of the new developments In Puerto Vallarta, it seems, “Acapulcoization” was attempted on a bad credit card.

Welcome to Goldman Sachs’ Happy Coast

While thousands of condos and hotel rooms stand empty in Puerto Vallarta, the Jalisco and Nayarit state governments are feverishly promoting new tourist developments on the Pacific Coast both south and north of Puerto Vallarta.

North of Puerto Vallarta, the state of Nayarit attracted $617 million in new tourism investments during recession-wracked 2009. Constituting 37 percent of tourism industry investment in Mexico last year, the money put Nayarit ahead of Sinaloa, Baja California Sur, Jalisco, and Tamaulipas as the magnet for new tourism dollars.

In late January, Jalisco Governor Emilio Gonzalez, a member of President Calderon’s National Action Party (PAN), announced the state government was committing $89 million from public pension funds for a joint private-public tourist development south of Puerto Vallarta known as Costa Alegre, or “The Happy Coast.”

The upscale development is planned in partnership with Rasa Land Investors PLC,  an investment group set up in 2007 to identify opportunities in Mexican coastal areas arising from the “privatization of land.” Also active in Baja California, Rasa Land has so far injected 94 million dollars into Costa Alegre, which in long run is projected to lure investments in the neighborhood of $1.3 billion.

Rasa Land’s major stockholders include Goldman Sachs and the New York-based TPG Axon hedge fund. Oscar Garcia Manzano, president of the Jalisco state pension board, Costa Alegre, told reporters the development would net profits in the 15 to 35 percent range.

More than two years before the next Mexican presidential election, Gonzalez frequently appears on national television spots that extol the achievements of his administration. He declared in a recent press conference that Costa Alegre will “replicate” and even surpass Cancun.

Word of the investment of public pension money in Costa Alegre came as news to Cuauhtemoc Pena, president of the General Federation of State and Municipal Workers of Jalisco. Given that the pension fund is currently short of money to cover the retirement expenses of its 115,000 members, Pena said he was surprised to learn that money from the account was going into a massive new tourist development.

Vallarta: Broke and Begging

Up the road in Puerto Vallarta, meanwhile, the city government is in the throes of financial crisis. By the end of last year, the previous municipal government failed to pay its workers their Christmas bonuses, fell behind in two regular salary payments and missed about $5 million in payments to the state pension fund. The city government owed many contractors for services performed, and was months behind in its financial obligations to the public library.

Currently, the city owes about $60 million to various creditors, with more than half the debt made up of a controversial loan taken out by former Mayor Javier Bravo. Ostensibly to pay for public works, the 15-year debt for about $30 million was contracted with the BBVA Bancomer bank.

Ironically, as Mexico celebrates its 200th anniversary of the war of independence from Spain, Puerto Vallarta finds itself in hock to the Spanish-owned BBVA Bancomer. Under the loan’s terms, Puerto Vallarta will pay the bank nearly $70 million in interest before the debt is cancelled.

In a January 31 report, Mayor Gonzalez said superfluous spending and various irregularities marked the two previous administrations, which were also headed by members of Gonzalez’s Institutional Revolutionary Party (PRI). Gonzalez warned that “belt-tightening” and outsourcing of public services like garbage collection could be consequences of the city’s financial predicament.

To meet the needs of a population creeping towards the half-million mark, the Puerto Vallarta city government counts on an annual budget of approximately $90 million.

In an interview with Frontera NorteSur prior to the mayoral report, Puerto Vallarta City Council Representative Gloria Teresa Palacios said it was urgent for the new administration to renegotiate the debt with BBVA Bancomer. The PRI city council member said the municipal government was looking at “modifying the terms of the loan,” possibly with a different bank.

Palacios said the city could ill afford to service a questionable loan. “We can’t be making these payments and foresaking public works,” Palacios argued. The elected official’s point was vividly illustrated by a recent leak in the sewage system that spilled into the Cuale River which flows into Banderas Bay and its popular tourist beaches.

For days in January, sewage shot through a manhole cover on an Old Town street running parallel to the Cuale River. Below the leak, municipal water and sanitation employees worked hard to lay bigger pipes to fix what one worker described as an obsolete system incapable of handling the growing volume of waste.

The leak continued even as the Second Annual Cuale River Festival kicked off to celebrate the cultural legacy of the river and its island. For Palacios, the Rio Cuale long has been a key pillar of local culture. Back in the day, she said, it was a popular place where children played and families gathered.

Surviving the Great Recession

Looking beyond the economic crisis, Puerto Vallarta’s residents are scrambling to move ahead. The constant thud of hammers signals widespread building re-modeling underway, and a few prospective customers are actually seen again inside real estate offices. For 2010, 231 cruise ships with 575, 378 passengers are scheduled to visit Puerto Vallarta. That’s 46 more vessels than docked in 2009.

New businesses are opening their doors. Easily among the gaudier ones, Guadalajara-based Wings Army, combines chicken wings, imported beer and G.I. Joe into a “different option for the demanding Mexican palate.” Although it is a Mexican business, Wings Army decorates the interior of its restaurants with US military regalia.

Growing to nearly 40 franchises in just four years, Wing’s Army has invaded south Texas, Puerto Vallarta, Culiacan, Torreon and many other Mexican cities. Reportedly, the chain is looking at conquering the rest of the Americas and Europe to boot. Wings Army’s sales of Dutch-owned Heineken beer, which just bought out the trademark Mexican beer brands of Tecate, Sol and Dos Equis, is perhaps another irony in a year when Mexico is celebrating the 200th anniversary of its war of independence against a European nation.

For a tamer if not necessarily purely Mexican experience, diners can amble across the street from Wings Army’s new Old Town outlet and encounter Johnny’s Diner, the restaurant with a sign that always says “closed” but actually opens up for a few hours during the day  to serve home-style Mexican-American food, including a killer chipotle sauce, amid a soda-fountain style dining area cheered up by 1940s pop music.

For Dyviam Romay, the Great Recession has been a hard lesson. Small business loans supposedly available from the government and private banks were nowhere to be found, she said, forcing the entrepreneur to tap into personal networks. “I went to the banks and nobody would give me money,” Romay added.

According to Romay, the Great Recession and 2009 peso devaluation represented an opportunity to rediscover Mexico’s national treasures. Two years ago, Romay and Luna decided to stop importing products for their interior design business. For years, Mexican businesses watched as the country was flooded with foreign goods, sometimes with absurd connotations. For instance, Vietnam’s communist/capitalists even found a market for appropriated Virgin of Guadalupe images pressed on baseball caps.

Today, Romay and Luna have turned the tables on the competitors by scouring Mexico for materials that could be made into products resembling items manufactured abroad. All in all, Romay contended, the new system puts more Mexicans to work, keeps import costs down and builds up the local economy with homemade products. The business model is sort of a grassroots version of the import substitution schemes once popular in Latin America.

“Now the Mexicans work with ideas from abroad so they will live, work and produce things that we don’t have here,” Romay asserted.

Frontera NorteSur (FNS): on-line, U.S.-Mexico border news Center for Latin American and Border Studies New Mexico State University Las Cruces, New Mexico.