Mexico's Senate passed a bill Thursday banning large cash transactions as part of an effort to fight money laundering that experts estimate may amount to around $10 billion per year in Mexico.
The bill forbids buyers and sellers from giving or accepting cash payments of over a half million pesos ($38,750) for real-estate purchases. It also forbids cash purchases of more than 200,000 pesos ($15,500) for automobiles or items like jewelry and lottery tickets.
The fact that the law took two years to move through Congress illustrates the sensitive nature of such rules in a society where small businesses and retailers, as well as gangsters, have long conducted many of their transactions in cash.
In 2010, President Felipe Calderon originally proposed rules to bar all cash real estate purchases as well as cash purchases of cars, planes and other goods for amounts exceeding 100,000 pesos ($7,700). But congress watered down that proposal.
Sen. Roberto Gil, of Calderon's conservative National Action Party, said the legislation now going to Calderon for his signature into law "has achieved a healthy and reasonable balance between the need to inhibit the use of cash and the normal development of our country's economic activity."
The law would also require notaries, brokers and dealers to report the forms of payment in purchases above the $38,750 limit. Similar reporting would be required for credit card payments when monthly balances exceed 50,000 pesos ($3,875).
Mexico implemented strict limits on cash dollar transactions in 2010 that limited the amount of dollars a person could exchange to about $1,500 a month in most cases. Those limits hurt travelers, as more banks decided to get out of the cash dollar exchange businesses, leaving less competition and higher spreads among the few remaining players.
Some people have predicted a similar downturn in some economic sectors, such as real estate, once the peso cash ban is enacted. The bill would take effect 90 days after it is signed into law and published.
"We know some sectors of the economy are worried, like the auto industry and the jewelry industry," said Sen. Alejandro Encinas of the leftist Democratic Revolution Party. But he added that "as long as we don't effectively combat money laundering and dismantle the financial power of organized crime, the problem of violence and drug trafficking won't disappear from our country."
Despite the potential pain, legislators said it was the only way to fight drug cartels.
"There is no way to go after organized crime, if not to hit their finances," said Sen. Cristina Diaz Salazar, a member of President-elect Enrique Pena Nieto's Institutional Revolutionary Party.