The Hangover: The Mexican Loophole

The Padres lost 11–0 to the Rangers on Tuesday, and Joey Gallo‘s third-inning home run off Jered Weaver skimmed the underside of one of Big Brother’s satellites. On a another note . . .

The other day I wrote about how the Padres might handle international amateur free agency over the next few years, unable to sign any players for more than $300,000. Then MadFriars, over on Reddit, made an interesting point that I’d overlooked. In their words:

Players from Mexico are generally signed directly from Mexican League teams, and so those teams require a rights fee for letting one of their players go to a major-league club. According to an older article by Ben Badler, only the portion paid to the player is considered as the actual signing bonus. So, as MadFriars notes, it’d be possible for the Padres to sign an international amateur from Mexico for somewhere in the neighborhood of $1.2 million, with $900,000 going to the Mexican League team and the other $300,000 to the player. Badler confirmed as much yesterday.

This is, to say the least, an interesting development, since we thought that the Padres would be limited to $300,000-and-under talent for two years.

It’s clear that the Padres already have some inroads in Mexico. Outfielder Tirso Ornelas was signed for $1.5 million last year from the Mexico City Red Devils. Badler notes:

The Padres have a good relationship with that club, as Alfredo Harp Helu, who owns the Red Devils, is an investor in the Padres’ ownership group.

They also signed outfielder Agustin Ruiz and pitchers Martin Carrasco and Duilio Ochoa in 2016. Further, the Padres most expensive international amateur signing in 2015 was Mexican right hander Andres Munoz, again from the Red Devils. Signed for $700,000, the Padres were only dinged for $175,000 for Munoz, at least as far as MLB is concerned. Luis Urias, too, was signed from Mexico, though that was back in 2013.

If the Padres are as smart internationally as we think they are (they are, we’re pretty sure), they’ve likely already been heavily scouting Mexico for higher profile players they can sign come July 2. It wouldn’t be surprising if the Padres invested in a slew of good Mexican prospects this summer to supplement the talent from the more traditional J-2 countries of the Dominican Republic and Venezuela.

While a player from Mexico who signs for $1 million can’t necessarily be directly compared to a player from the Dominican Republic who signs for $1 million (with the rights fee being a majority of the total figure), it’s also likely that the rights fee is suppressing the bonus that’s being paid directly to the player. So, for example, Munoz probably wouldn’t fetch $700,000 on the open market, but he’s also worth more than the $175,000 that counted against the Padres bonus pool. Maybe he’d cost $400,000 or $500,000 in a market without rights fees. In other words, these players from Mexico are possibly better than your typical $300,000-and-under prospect.

Using this loophole in the international amateur rules, the Padres might be able to add a bunch of Munoz/Ornelas type players by focusing more of their scouting resources in Mexico. With close connections to at least one Mexican League team, it’ll be interesting to watch this angle develop over the summer.

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