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 Business News | April 2006 
Legalizing Immigrants Could Cut Flow of Money They Send Home, Mexican Economist Warns
 Mark Stevenson - Associated Press
| | Workers take part in a 'We Are America' immigration rights rally April 10, 2006. U.S. immigrant rights advocates on Thursday called for a nationwide boycott of work, school and commerce on May 1, seeking to capitalize on the momentum of recent mass demonstrations across the country. (Mike Segar/Reuters) |
Mexico City – A proposal in Congress to legalize millions of undocumented migrants in the United States could backfire by slashing the amount of money they send home, Mexican economists warn.
The argument goes like this: Mexicans who have permission to work in the United States will want to bring their families north to live with them, eliminating the main reason they send money home. That would hurt Mexican businesses that have come to depend on the money sent down from the United States.
Miguel Cervantes Jimenez, an economist at Mexico's National Autonomous University, said remittances could drop by as much as 40 percent.
He based his calculation in part on the situation in Turkey, where he said half the remittances disappeared in 2001, the year after Germany – a main destination for Turkish migrants – passed a broad legalization law.
“If I already have my family with me, I no longer have much reason to send money back home,” he said.
In 2005, migrants in the United States sent home $39 billion. About half went to Mexico, where remittances are the second-largest source of foreign income, after oil sales. In El Salvador and Guatemala, remittances represent the largest source of foreign revenue.
There are no reliable figures on what happened to remittances in Mexico after a 1986 U.S. law legalized 2.6 million undocumented migrants; Mexico acknowledges it wasn't keeping very good track of the income back then.
According to central bank figures, remittances jumped by 39 percent in 1987, then dropped 13 percent in 1988. But the bank abandoned its old accounting system by 1990, calling it unreliable.
The effects of any legalization bill wouldn't be immediate because it would take time for migrants to sponsor family members for residency, said Agustin Escobar, an immigration specialist at Mexico's Center for Research on Social Anthropology.
Initially, there might even be a rise in remittances.
“In most models, legalization results in better conditions for workers, and in the very short term that improves their income and thus their capacity to send money home,” he said.
However, he said, an eventual drop would be felt in Mexico's mid-sized cities “among loan companies, businesses that sell farm supplies, and suppliers for small businesses.”
“The effect on remittances in the space of two or three years could well be a decline,” he said.
Jeronimo Cortina, a political scientist for the California-based Tomas Rivera Policy Institute, said such a drop could affect Mexico's foreign reserves.
But Jesus Cervantes, director of statistics for Mexico's central bank, said the country's economy would suffer only in an extreme situation – such as if all 6 million of its undocumented migrants in the United States were deported at once.
He calls a big drop in remittances unlikely, and predicts there will be a steady stream of migration – and thus remittance income – for at least three decades, as wage differences between the two countries persist even under the best scenarios.
“There have been amnesties and reforms before, and they will continue to occur periodically” as the United States adjusts to its need for labor, Cervantes said.
A sharp drop in remittances could be devastating for towns such as Santa Ana del Valle, Oaxaca, which has the highest emigration rate in Mexico and where 46 percent of households receive remittances.
“A lot of people send money back,” said town Councilman Reynaldo Bautista, 52. “A lot of the town depends on that.”
Bautista said many migrants would take their families north to live if they could, a dream that becomes easier with legalization.
Bautista is himself a case in point: He brought his wife and children to live with him in the United States when he obtained residency. He returned alone to serve as councilman – a duty demanded of men in his traditional Indian town – but plans to return north as soon as his two-year term is over.
Globally, remittances amounted to $226 billion in 2004, according to the World Bank, with $145 billion going to developing countries led by India, China and Mexico.
A 2006 World Bank report noted that remittances amount to twice as much as all international development aid, and noted they can “improve a country's creditworthiness for external borrowing and ... expand access to capital and lower borrowing costs.”
The report suggested the best way to maximize development in migrants' home countries would be “managed migration programs ... that combine temporary migration of low-skilled workers with incentives for return.”
The pending U.S. measure would create a guest worker program, in addition to strengthening border security and offering eventual citizenship to many of the estimated 11 million illegal immigrants in the country. The proposal is currently gridlocked in the Senate.
Remittance losses could be offset by money sent home by temporary migrants participating in an expanded guest-worker program, or by those who remain outside the law – and therefore would be less likely to bring their families with them.
The Mexican government's official position is that getting legal status for its migrants is more important than any potential loss of remittances.
“It would be no problem for the economic development of the country if this were to happen,” presidential spokesman Ruben Aguilar said, “as long as the citizens of our country could get better, and above all more dignified, living conditions” in the United States. |
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