Baja-Bound Gringos Flee US Prices

ON an outcropping along the coastal highway here, there is a huge sign painted in red and green: ``Viva Mexico.'' It's nothing unusual for a country that burns with nationalistic pride. But competing for space on the same rock face is another message that, ironically, promotes the latest Yankee ``invasion.'' In plain English, it reads: ``Homes For Sale.'' An arrow points to the beach.

Some 45,000 Americans have already moved to Baja California, attracted mainly by the low cost - and low tension - of beach-front living. In fact, with seaside homes selling for as little as $20,000, expatriates have turned parts of this scenic coastline into an insular American colony.

More than two-thirds of the Americans settled here are retirees escaping the soaring real estate prices of southern California. Some are low-paid Navy employees who shuttle across the border to the large naval base in San Diego. Still others are wealthy executives looking for a hideaway.

Regardless of who they are, many expatriates share one thing in common: They are not legally registered with the Mexican government. Unlike in the United States, where illegal immigrants usually occupy the lowest rung on the socio-economic ladder, these undocumented Americans live like kings on the coast, pumping an estimated $17 million a month into the local economy.

``It's a case of undocumented aliens in reverse,'' says Hermilo Lopez Bassols, the former Mexican consul in San Diego. Mr. Lopez Bassols contends that the valuable coastal land should be used for more profitable projects, such as developing the enormous tourist ``corridors'' envisioned by Mexican President Carlos Salinas de Gortari.

``We don't want to divide our territory up into tiny pieces for foreigners,'' he says. ``That kind of investment doesn't suit Mexico. It's not productive.''

But by loosening foreign-investment regulations in May, Mexico made such beach-front investments more enticing.

Mexicans are still the only ones allowed to own land within 50 kilometers (31 miles) of the coast or 100 kilometers of the border. Foreigners are limited to indirect control over such land through government-managed leases. But with the new rules, these nonrenewable leases can be extended to 60 years from their former 30-year limit. Many foreigners have already circumvented the law by obtaining land through so-called prestanombres, secondary agents who sign the lease or hold legal title to the land.

This change in the investment law is bound to attract more retirees, who will be able to pass on property to their heirs. Experts say it is also likely to encourage larger, longer-term investments - especially as Californians discover that a $1 million home on the San Diego coast could cost less than $100,000 to build 25 miles south.

Baja California already boasts the third-largest American community in Mexico, trailing only Guadalajara (150,000 Americans) and San Miguel de Allende (around 80,000). Americans make up about 10 percent of the population in Ensenada.

But only about 7,000 expatriates are registered with the US Consulate in Tijuana. Part of it may be laziness or disinterest. As one US official here puts it: ``Some of these people think they have escaped the long arm of the IRS [the US Internal Revenue Service].''

According to Nora Bringas, a specialist in tourism and coastal development at the College of the Northern Frontier, the American presence has helped a small sector of Mexican society by offering jobs mainly in construction, housekeeping, and the health industry.

But the ``gringos'' also damage the general environment, says Ms. Bringas. Not only do more than half discharge their untreated waste into the Pacific Ocean, but they also push up prices, block access to some public beaches, and ``pose a risk for our national sovereignty,'' she says.

Such fears of losing cultural control over Baja California are also expressed by government officials in Mexico City. To counteract American influence in Tijuana, for instance, the government has built a cultural center, initiated a cultural radio station, and begun a cultural magazine.