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Property rights and Mexican emigration

On the surface, this story in the Houston Chronicle is about American retirees buying homes on the beach in Mexico. There are beautiful places in Mexico that would be attractive places to live. But an oddball law - foreigners were prohibited from owning property within 30 miles of the beach - and insecure property rights deterred Americans moving to Mexico. Now that is changing, in a big way.

Burros hauled construction materials up the jungle-covered mountain when Angela and Tom LeBrun began building their vacation home 15 years ago.

To survey their property overlooking Banderas Bay, the Dallas couple had to cling to tree branches as they climbed down the lush mountainside. Cobblestone streets now lead up to their colonial-style casa in the Conchas Chinas neighborhood, which is filled with luxurious homes and condominiums owned mostly by American retirees and vacationers.

Such Mexican beach resorts are so popular with retired Americans, baby boomers nearing retirement age and even middle-aged couples wanting vacation homes that condominium and housing developments are often sold out before construction is complete.

"It's grown by leaps and bounds," Angela LeBrun, 58, said about Puerto Vallarta as she sat on her bougainvillea-covered terrace.

What accounts for the change? In a word, NAFTA. More specifically, in the past decade, American companies have set up title insurance and mortgage companies across the border, bringing modern finance and more secure property rights to a country where they are in short supply. (My guess is that the oddball law was invalidated by NAFTA also).

The conventional wisdom is that Mexicans come to the US for better wages and employment opportunities. But at a deeper level, by emigrating they make a choice between poor and good institutions, both public and private. As the Chronicle article illustrates, when Mexican institutions improve, the flow reverses, and Americans emigrate to Mexico.