The chile pepper has long been a part of the history and culture of the Southwest, and now is an important horticultural crop in New Mexico. Recently the industry has faced many challenges including cheaper imports and rising production costs, which have reduced chile acreage in New Mexico by almost half. To compare production costs in southern New Mexico and northern Mexico, representative cost and return estimates for the two regions were prepared. Even though U.S. producers have higher gross returns, the overall return to land and risk is greater for producers in Chihuahua because of lower production costs (largely due to lower wage rates). This study found advantages and disadvantages for producers on both sides of the border.