Growth Of Work Remittances Back To Mexico Slows To Trickle

Growth of worker remittances back to Mexico slows to trickle

By Stephen Dinan
The Washington Times
September 13, 2007

Remittances to Mexico the money Mexican workers in the U.S. send back home barely rose in the first half of this year, breaking a streak of phenomenal growth and raising the prospect that Mexico's second-largest source of foreign income is stagnating.

From 2003 to 2006, remittances averaged nearly 20 percent growth per year. That fell to less than 1 percent for the first six months of this year, compared with the first half of last year, according to a Migration Policy Institute report that based its data on Bank of Mexico figures.

Remittances fell 4 percent in June this year, compared with June 2006, though July's numbers rebounded at 4 percent more than July 2006.

The cause of the drop is not clear, and could range from more accurate accounting methods to a decline in housing construction, which means fewer jobs for both legal immigrants and illegal aliens.

Remittances are second only to oil sales as a source of foreign income for Mexico, and because they usually go directly from workers to families at the low end of the economic scale, a slowdown could become a pressing issue for Mexican officials, said Aaron Terrazas, the report's author.

“Remittances are clearly important for the Mexican economy, but more important, they're important for Mexican families,” he said. “Remittances are not something that goes to governments; they're not something that goes to big development projects. They traditionally go to families to pay for education and pay for necessities.”

Mr. Terrazas' study found that the change varied across Mexico. Five Mexican states still recorded big jumps in remittances, while another five states reported drops of 5 percent or more.

Remittances account for more than 10 percent of gross domestic product in two states: Guerrero and Michoacan. Guerrero's remittances increased in the first six months of this year, while Michoacan's dropped substantially.

A report last week from Bear Stearns, a financial consultancy, said the sluggish numbers are probably the result of a slowdown in home building. In a report on investment in Mexico, the analysts said the slowdown in growth of remittances began in late 2005 or early 2006, about the time U.S. construction began to slow.

Bear Stearns said the immigration debate this year also could have played a role, with some illegal aliens saving their money for the prospect of gaining legal status and a path to citizenship in exchange for paying a fine totaling thousands of dollars.

Statistics from the Department of Homeland Security show that visits under the usual rules for tourists and students to the U.S. are on the rise. That runs counter to anecdotal stories that the country is losing visitors because its procedures are a burden and the country is seen as unwelcoming.

In 2006, there were 33.7 million admissions that required an I-94 form, which grants entry for business, education or tourism. That was up from 32 million in 2005 and 30.8 million in 2004.