Mexico's Peso Paradise

By Michael Demarest

Devaluation brings vacations that cost less than staying home

After waking up in a clean, comfortable, $7-a-night hotel room in Mexico City, the young couple from Kansas City ate a four-course breakfast that cost them 70-c- each and then took a 1-c- bus ride downtown for a morning of sightseeing. Bob and Rhonda Sparks spent $2 for a spicy three-course lunch near the Palacio de Bellas Artes and realized that "the amount of money we brought down here for two weeks could last half a year." At the delightful little Hotel Montejo in Merida, Ted Mills and Jill Heizman of Santa Cruz, Calif., paid only $5.50 a night, about the average price they encountered during a month-long tour of Yucatan. Such bargains are all the more remarkable considering that this is the peak of the Mexican tourist season.

Exhilarated vacationers can be spotted from the Mayan ruins of Tulum to the bikini-bright beaches of Puerto Vallarta. Since Dec. 20, when devaluation of the nation's currency more than doubled the purchasing power of the dollar, from 70 to 150 pesos per $1, Mexico has become what one tourist industry executive calls "the travel bargain of the century." Says Bronnie Kupris, president of Manhattan's Asti Mexico Tours: "Our volume is up 400% over last year." New York-based Alexander Charters sold 2,100 airline seats to Mexico from January to Easter last year; so far this year, halfway through that period, the company has sold almost 6,000 seats.

Package tours, as always, are the best buys. American Express has been offering seven-night stays in economy-class hotels in Acapulco or Cancun for $99, not including airfare. Mexico Travel Advisers (M.T.A.), the largest U.S. wholesaler of package tours to Mexico, can fly the vacationer from Los Angeles or San Diego to Mazatlan and back, put him up at a good hotel for a week and include sightseeing and airport transportation for $236. Los Angeles residents can get away even more cheaply by driving to Tijuana (about 2 1/2 hours) and flying on to their holiday destinations from there; a one-way coach ticket from Los Angeles to Acapulco, for example, costs $242, while the Tijuana-Acapulco flight costs only $94.

Among the greatest bargains are restaurant meals. Marisqueria del Perro Andaluz, an outdoor cafe in Mexico City's chic Zona Rosa, charges $8 a person for a three-course dinner. Maine lobster flown into Mexico costs around $6, less than in Maine. At a Burger Boy outlet, tourists hungry for the discomforts of home can get a double hamburger, French fries and a Coke for less than $1 .

High-quality Mexican leather goods are a particularly choice buy: handmade boots for $20, handbags from $15 up. Exquisite native handcrafts cost so little that five Continental Airline stewardesses flew to Mexico City this month just to shop for items like black Oaxaca pottery vases for 23-c- each. Olinola lacquer boxes, with their distinctive red-and-black animal designs, sell for as little as $2.50; designer clothes and auto rentals can also be very cheap. A cab ride across downtown Mexico City costs $1 .

Boom-time vacations may not be all tequila and roses. At the beach resorts, where most American tourists are headed, hotels are chronically overbooked; even at the best places, visitors may find on arrival that there is no record of their reservations. Mexico's internal airlines are jampacked and erratic, and there can be a wait of several days for a rental car.

An even less attractive aspect of the bonanza is the double-rate system practiced by some hotels: one rate (low) for Mexicans and another (high) for foreigners. For example, the Holiday Inn in Ixtapa last week was officially charging $60 a night for all guests, but a Spanish-speaking TIME correspondent was twice quoted the much lower figure of $37.50. The government is trying to police the industry. A senior official promised, "The Secretariat of Tourism is now very clearly insisting to hoteliers and all tourism-related services that prices be quoted in pesos and then converted to the equivalent in dollars at today's rate. If you just come and pay in dollars at whatever rate they give you, you will be saving money. That's the message."

While North Americans scramble to take advantage of the devalued peso, some segments of the U.S. economy are suffering. Colorado ski resorts and Beverly Hills boutiques are missing big spenders from Mexico, whose style has been crimped by the stringent curbs placed by the Mexican government on foreign financial dealings. In Vail, Colo., for example, where Mexicans own as much as 10% of the real estate, their inability to exchange pesos for dollars has reduced the market for expensive condominiums. In La Jolla, Calif., there has been a rash of defaults by Mexicans who can no longer meet their mortgage payments. The South Texas real estate market, once a favorite with Mexican investors, has been particularly hard hit. Construction of an office tower in San Antonio has been stalled, and investments in the South Padre Is land resort have been reduced to a trickle.

--By Michael Demarest. Reported by David Hessekiel/Mexico City

With reporting by David Hessekiel This file is automatically generated by a robot program, so viewer discretion is required.