The term boomerang is considered a noun and a verb. As a noun, it is defined as a curved flat piece of wood that can be thrown so as to return to the thrower, traditionally used by Australian Aborigines as a hunting weapon. As a verb, boomerang means a plan or action that result in a return to the originator, often with negative consequences.
One of the overlooked, unanticipated consequences of social, economic and political policies is that they inherently possess a boomerang effect. A current example of this phenomenon is the negative consequence U.S. President Donald Trump’s range of policies have thrust upon a major demographic cohort in the United States: The Baby Boomers.
U.S. Baby Boomers (born between 1946 and 1964) are retiring – in droves. Some estimates suggest up to 10,000 a day. U.S. boomers have been characterized as “having a you only live once” mindset. Boomers have been uniquely focused on having personally and professionally productive retirements. “They seem driven to try new experiences and stay active throughout their golden years. “Boomers, along with Gen Xers, hold what are described as “consistently or mostly liberal views than have conservative positions.” Another observer notes: “Whether it’s for economic viability or to gain companionship, seniors’ willingness to think outside the box is driving the growth of unconventional housing solutions.” One of the experiences boomers are living in their golden years involves moving south, to Mexico. Why? What are the economic roots and implications of this movement?
According to a recent study, U.S. boomers are ill-prepared to maintain their current lifestyle in the United States in their retirement years. An estimated one-half of U.S. boomer retirees will be solely dependent upon their Social Security income. Just under 25% of boomers have no retirement savings whatsoever, while 42% will have saved less than $100,000. Once referred to as the wealthiest generation in U.S. history, the estimates of current U.S. boomer wealth ranges from U.S. $4.6 trillion to $30 trillion. Whatever the exact figure may be, boomer holdings of residential properties comprise a significant portion of that wealth. U.S. Boomers ages 65 and over have an estimated “extractable” home equity figure of $3.1 trillion. With the peso currently trading at 19.4 pesos to one U.S. dollar, the financial attraction of Mexico as a retirement destination for U.S. boomers is both legitimate and alluring. Perhaps Donald Trump has fallen prey to what New York Times bestselling author Michael Lewis has referred to as the fifth risk: “It’s what you fail to imagine that kills you.”
Between 2016 and 2017, 2016-to 2017, Mexico was the unequivocal primary travel destination of choice for U.S. residents, rising 12% from 31 million to 35 million during those years alone. In 2018, the figure rose to nearly 40 million. Interestingly enough, it has been noted that more U.S. residents are moving to Mexico than Mexicans moving to the United States. Estimates of Mexican revenues from tourism are estimated at U.S. $20.3 billion in 2018. The recent growth of the tourism industry in Mexico is remarkable. It reached new heights in 2018 and is currently the fifth largest source of revenue for Mexico. The fastest growing segment of the Mexican economy is tourism (among others). Tourism contributes an estimated 8% of Mexican GDP. For Mexico, one of the primary sources of foreign exchange, along with remittances and petroleum exports, is tourism.
The strategic importance of the Mexico-United States economic interchange is of vital importance, to both nations. The U.S. is Mexico’s largest trading partner. For the United States, Mexico ranks third as a source of U.S. imports and second as an export market. In 2017, Mexican exports to the U.S. total approximately 37% of Mexico’s GDP or 80% of all of Mexico’s exports. What these figures do not reflect is the export of the purchasing power of U.S. boomers now flowing to Mexico for their retirement years.
Incredibly, the U.S. Government does not maintain statistics on the number of U.S. citizens living abroad. The U.S. State Department estimates the current figure to be in the ballpark of 9 million. The number of U.S. citizens residing in Mexico ranges from 1.7 million to over 2 million. It is safe to say that “Mexico is the country with the largest community of U.S. citizens living outside the United States;” more than any other country in the world.
As I have written elsewhere, the steady stream of North American boomers headed to Mexico for retirement is a MEXODUS. It is reasonable to believe these numbers will continue to escalate. The primary motivation of boomers headed to living in Mexico is to reduce their overall cost of living, among others. The economic contribution of boomers who make the leap south to Mexico for their retirement years will be a windfall for Mexico. Their departure may also contribute to unanticipated factors taking the wind out of the sails of the U.S. economy. What can the United States do to address this phenomenon? Frankly, not much if anything. It’s too late to assemble a legitimate “affordable healthcare” system in the United States that will entice boomers to stay. A significant Medicare and Social Security increase? Fat chance, politically. Eliminate political rancor and polarization in the United States … not happening. For boomers driven by “economic viability, a willingness to think outside the box regarding unconventional housing solutions, to try new experiences, and stay active throughout their golden years”; well, Mexico is terribly attractive.
What might Mexico do to capitalize on this once in a generation economic opportunity? First, to fail to target this economic windfall would be an avoidable strategic oversight. The new Mexican Federal Government, the National Office of Tourism in Mexico, and cities throughout Mexico should become focused on this bonanza and engage in outreach marketing to this North American boomer market. A comprehensive examination of any current, non-essential barriers for relocation to Mexico by boomers is a superb suggestion. Mexico, like many other countries, has public health and environmental hazards that need to be addressed. This agenda should be elevated to a national priority, as identified in Mexico’s NaturAMLO initiative, touted by new Mexican President Andrés Manuel López Obrador. Finally, Mexico should consider enacting a set of incentives to attract North American boomers to relocate to Mexico.
For Trump, the boomerang he has thrown at Mexico is bound to return to him with a myriad of unanticipated, ongoing, negative, economic and socio-political consequences. For Mexico, Trump’s boomerang is bound to return economic windfalls for years to come.
This article is an authorized excerpt from the book Dahl B., Lake Chapala: Beneath The Surface. Considerations for Retiring in Mexico, 2019. It is available in paperback and e-book editions on Amazon.