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 News from Around the Americas | May 2007 
Mexico Feels Pinch of US Housing Slump
 Valerie Rota & Alexander Ragir - Bloomberg News
| | A Lennar Corp. development is picured in Miami, Florida. The US economy weakened dramatically in the first quarter to its worst growth pace in four years, expanding at a clip of just 1.3 percent, new government figures showed Friday. (AFP/Joe Raedle) |
Ernesto Pérez, a 27-year-old Mexican immigrant, says construction work in New York has become so scarce that he has stopped sending money back to his parents in the southwestern state of Guerrero.
"If I don't find work soon, we're moving back home," Pérez said last week as he walked away from the corner in the Queens borough of New York City where he and dozens of Hispanic workers go each day in hopes of being chosen for construction jobs. On this day, Pérez gave up after a six-hour wait.
The U.S. housing slump is squeezing Mexican migrant workers from Los Angeles to New York, where permits for new home construction are down 20 percent this year, according to the U.S. Census Bureau. That is reducing the pace of money transfers, the second-biggest source of dollars in Mexico after oil exports, and turning the peso into a laggard among Latin American currencies.
Remittances rose 3.4 percent in the first quarter, the slowest growth in eight years. The peso has strengthened only 0.2 percent this year, to 10.7847 per dollar, the second-worst performance among the most-traded currencies in the region.
Cross-border transfers, which totaled $23 billion last year, also have been hurt by President George W. Bush's crackdown on illegal immigrants. Bush increased security along the border and stepped up raids on factories hiring undocumented workers to help win congressional support for a bill that would give illegal immigrants a chance for permanent residency.
The number of people caught trying to enter the United States illegally from Mexico dropped almost one-third in the first quarter to 265,000, according to U.S. Border Patrol data.
The crackdown "certainly has an impact," said Pia Orrenius, an economist who tracks immigration and remittances at the Federal Reserve Bank of Dallas. "It raises the cost of coming over."
The only Latin American currency to do worse than the Mexican peso this year is the Argentine peso, which has fallen 0.8 percent because of daily dollar purchases by the central bank. The Colombian peso gained the most, up 17 percent, followed by the Brazilian real, up 10 percent.
Morgan Stanley and Dresdner Kleinwort predict that the Mexican peso will fall for a second straight year because of the slowdown in money transfers, a drop in oil production and weakening demand for the country's exports. Morgan Stanley forecasts a 5.4 percent drop to 11.4 pesos per dollar by year-end. Dresdner predicts it will slide to 11.19. The peso fell 1.7 percent in 2006.
"We should expect some weakness," said Omar Borla, a Latin America economist with Dresdner in New York. "Remittances won't help the currency as much as they did in the past."
Residential construction in the United States fell by 17 percent in the first quarter, according to the Commerce Department. The construction industry is the biggest source of work for Mexicans working in the United States, accounting for about 20 percent of jobs, data from Mexico's central bank shows.
The pace of money transfers has moved in step with the U.S. construction industry since the late 1990s, said Dawn McLaren, a research economist at Arizona State University in Tempe. The correlation between the two has become so strong that she uses border apprehensions as a "leading indicator" for the U.S. housing market.
McLaren said she expected transfers to slow "at a more visible rate than we have previously seen."
Pérez, who lives in the Corona section of Queens with his wife, two-month-old son and brother, said construction work was stronger when he arrived a year ago. "Last summer I had work six days a week, making $80 a day," he said. "It's started off slow this year. If I don't have any money, I can't stay."
About 2,500 miles, or 4,000 miles, away in Los Angeles, Miguel Saldivar also is struggling to find work.
"There has been no work for two, three weeks," Saldivar said as he waited at the corner of Oxnard Street and Van Nuys Boulevard, one of more than 100 intersections where day laborers congregate in Los Angeles. He said he sent as much as 75 percent of what he earned back to his mother and brother in Mexico.
"It depends on how many days we work," Saldivar said. "Now I am making nothing."
Rufina Rodríguez, a mother of three, is feeling the squeeze in Mexico City. Her brother, who picks strawberries in California, has sent her less than $100 this year, down from about $230 each month in 2006. She said her brother, an illegal immigrant, was holding on to more money, concerned he would lose his job because of the crackdown against undocumented workers.
"Its tougher now," Rodríguez said as she walked out of a bank branch in downtown Mexico City. "He says the authorities are on top of them."
The slowdown in transfers will start to crimp consumer spending in Mexico, said Alberto Ramos, a Latin America economist at Goldman Sachs Group in New York. Almost 90 percent of transfers received in Mexico go to consumption, according to the central bank.
The Mexican economy expanded 2.6 percent in the first quarter from a year ago, down from 4.8 percent last year.
"Families will have less money to spend and so activity will slow," Ramos said. "That will strain the peso."
Alexander Ragir reported from New York. |
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