Economic and Social Impacts
Loretanos say that they enjoy a relatively high quality of life.
Despite the lack of greater employment opportunities and local
services such as a hospital, public transportation, and large retail
stores, most people in Loreto report satisfaction with the quality of
life in the community (Carrilio and Ganster 2006). Loretanos have a
sense of their historical past and value it. The strong community
feelings are reflected in high rates of political participation.
Loretanos share many cultural and social values and the community
displays significant internal cohesion.
Loreto’s population grew at an average annual rate of 3.9% (doubling
time of 18 years) during the decade of the 1990s and the community was
able to retain its traditional social values. In conversations and
interviews, people from the community express concerns that this sense
of community and shared culture might be lost in the event of rapid
population growth associated with high economic growth in the future.
Annual growth rates similar to those experienced by Los Cabos in the
1990s (over 9% per year, doubling time of about 6 years) would bring
new perspectives and values to Loreto and would likely overwhelm
traditional social cohesiveness and sense of community.
A review of the quantitative indicators shows that Loreto lags behind
the state of Baja California Sur and Los Cabos in average life
expectancy, infant mortality, per capita income, and education (Gerber
2006; Carrilio and Angeles 2006). However, despite these differences,
survey research (Carrilio and Ganster 2006) and informal conversations
with Loreto residents reveal that many Loretanos contrast Loreto with
Los Cabos. Many clearly state that they do not want to become like Los
Cabos. They feel satisfied with Loreto as a community, they feel safe,
and they have a positive view of the future.
Reconciling future growth and development needs with the strong sense
of maintaining the existing community structure is one of the critical
challenges for community leaders. In this study, we evaluate these
future options with quantitative models, while recognizing that many
of the aspects are fundamentally qualitative and must be addressed
through the political process.
The economic assessments are based upon the projections for the number
of new rooms in tourism and planned communities intended for foreign
housing markets, and the rate at which new migrants are drawn to the
area in search of economic opportunities stemming from real estate and
tourism investments.
For this analysis, we assume that the economic and demographic impact
of housing developments aimed at North American buyers is the same as
conventional hotel-based tourism. In fact, the impacts that accompany
these different types of markets might vary significantly if occupancy
rates, average daily expenditures, and wage rates paid to employees
differ substantially. This suggests that the actual impact of housing
developments might be higher or lower compared to traditional hotel
tourism. However, we believe that differences between the two markets
will be small when compared to the variation in performance within
either one of these markets. This assumption is bolstered by the fact
that many of the second homes being sold in Loreto are being sold as
‘horizontal hotels,’ meaning that the homes are to be centrally
managed and rented while the owner is not in residence. The
distinction between hotels, timeshares and second homes is
increasingly blurred in modern tourism markets. Moreover, the pricing
and performance of these different sub-sectors will be closely linked,
as are rental and purchase markets in conventional real estate
markets.
The growth of the tourism and real estate markets in Loreto will
constitute an exogenous boost in investment and spending for the local
economy. As such, the performance of the economy will be based
primarily on the success of the tourism and real estate sectors. To
our knowledge, there are no studies that quantify the factors that
explain the relative success or failure of tourism destinations in
Mexico. This is understandable given the paucity of data that track
income, growth and tourism performance indicators. The available data
(occupancy rates, domestic and foreign participation in tourism
markets, per capita income rates) do allow us to make the following
observations. Destinations that enjoy high occupancy rates and high
participation in foreign markets are correlated with higher per capita
incomes. The best examples of this are Cancún and Los Cabos. Of
course, this success in tourism and high per capita incomes does not
preclude underlying disparities in income distribution and social
problems. (Not that one would choose lower per capita income given the
choice.) The tourist destinations that have lower per capita income
are those that are supported more by domestic tourism. This does not
suggest that domestic tourism is necessarily undesirable, only that
domestic tourism markets are correlated with lower per visitor
expenditures.
The success of tourism destinations is based on providing a
top-quality tourism product and in exploiting a destination’s
competitive niche. Cancún and Los Cabos have done well in the ‘sun and
sand’ markets although occupying somewhat different positions in this
market. Two important distinctions must be made when considering the
future of the Loreto market. First, Loreto is not well positioned to
compete in the ‘sun and sand’ market due to its poor quality beaches.
The failure of the Loreto market to grow over the past two decades
compared to Los Cabos is ample evidence to support this assertion.
Second, the future of the Loreto market will be more heavily weighted
toward the preferences of homeowners as compared to tourists that
spend a relatively short time at a destination. Both of these points
are related to the same principle: the success of Loreto will be based
more on public amenities as compared to many traditional tourism
markets. The Loreto market will be more sensitive to social and
landscape issues that are more apparent at a regional scale, whereas
many resorts in other locations are able to compete effectively solely
on the environment of the specific resort site, without suffering as
much from problems in the nearby communities and environment.
The economic model for Loreto used for this study is based on the
performance of the factors that will determine the competitiveness of
the tourism and real estate markets. These factors are shown in Table
5. Weights are assigned to each of these factors to assess the overall
performance of the tourism and real estate markets. This performance
is in turn linked to per capita incomes. In order to produce
indicative estimates, these outcomes are calibrated to the range of
outcomes currently observed in other Mexican tourism destinations.
The weights for these factors are
derived from two surveys carried out for this study. One survey was
conducted on the current English-speaking community in Loreto. This
community is made up of mostly seasonal residents that originate from
North America. A second survey was carried out on possible homebuyers
from the San Diego area. This survey was implemented over the Internet
and advertised on the website of the San Diego Union-Tribune
newspaper. (We surveyed people of non-Mexican origin, not because
their opinions and preferences should carry more weight than that of
residents of Mexican origin, but because their preferences are more
likely to coincide with the preferences of the housing markets that
will drive the economy of Loreto.)
The performance of each of the factors mentioned above is drawn from
the results of the other impact models, such as the visual assessment
and marine models. Other factors are correlated simply with the
population of the region. The performance of many of the factors tends
to decline as the size of the community grows. However, some of the
economic performance factors, such as accessibility and transportation
and the availability of commerce and services, tend to improve as the
population and tourism market of the region increase. The projected
performance of the tourism market for each of the scenarios is shown
in Figure 24. This model also produces a projection of per capita
income and gross regional product.
Gross regional product presents a very
different measure compared to per capita income. Gross regional
product is driven by both the size of the population and per capita
incomes. In this sense, gross regional product is more likely to
appeal to national policy makers while per capita income is perhaps a
better measure of local economic performance.
The next step in the analysis is to create an overall index of social
and economic performance to allow the comparison of the twenty-five
different Alternative Futures. This index is comprised of 6 factors:
per capita income, gross regional product, number of households in
poverty, social cohesion, crime, and access to public services. The
estimates for per capita income and gross regional product are drawn
from the analysis described above. (Neither one of these measures
accounts for income distribution. This would have been another obvious
choice for including in the socio-economic performance index. However,
there is not adequate data to estimate the impact of different
patterns of growth on income distribution.) Social cohesion is
projected to decline and crime is projected to increase as population
grows. This corresponds to the experiences of urbanization in Mexico.
Access to public services, such as health care and education, is an
important aspect not only of human welfare but also of future economic
competitiveness. Projecting how public services will vary in the
future is speculative at best. For this study, we have created a
simple quantitative model in which access to public services is
projected as a function of 5 factors, equally weighted: the number of
people in poverty, the annual growth rate, per capita income, gross
regional product, and total population. Public services would increase
with rising incomes, both per capita and gross regional product. The
quality of public services would drop with increasing numbers of
people in poverty who would put increasing demands on public
resources. All else equal, the availability of public services would
improve as the size of the community grows with greater efficiency
coming from the economies of scale. Finally, the performance of public
services would suffer as population growth rates increase — there is a
natural lag in the provision of services as the government attempts to
catch up with a rising population and invests in expanding services. A
difficult fact of life in Loreto is that the municipal government has
little control over the level of spending on public services. Most of
this funding comes from outside sources, predominantly state and
federal transfers.
Combining the projected values for these factors for each of the
alternative futures produces the socioeconomic index measure shown in
Figure 25.
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