Avoid Mexico’s Hidden Cabo Tax: Pay in Pesos, Not Dollars
When heading to Los Cabos for a vacation, many visitors unknowingly fall prey to the Cabo tourist tax. This isn’t an actual tax, but rather a hidden cost incurred by travelers who use U.S. dollars instead of the local currency, the peso. While U.S. dollars are commonly accepted in Cabo, relying on them can cost you more than you’d expect due to unfavorable exchange rates and extra fees.
The Cabo tourist tax refers to the practice of businesses offering to accept U.S. dollars but at exchange rates that heavily favor them. When you pay in dollars, you’re often charged more than what you’d pay if you used pesos. Essentially, the exchange rates applied by vendors are much worse than the official rates, leading to a price hike that can sneak up on you during your trip.
For instance, imagine you’re taking a short water taxi ride in Cabo. The fare is quoted at 400 pesos, and at the official exchange rate of $1 USD = 18.75 MXN, this should cost about $21.33 USD. However, the operator uses their own exchange rate, setting it at 16 pesos to the dollar, which makes the trip cost $25 USD instead. This is a nearly 18% markup, and it’s just one example of how the Cabo tourist tax can quickly add up.
