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 Business News | May 2008 
The US Recession Hits Home - in Mexico
 Greg Brosnan - BusinessWeek
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| | Money transferred from abroad is a vital source of capital for poor households and a potential vehicle for community development. | | |
In better times, the money Martimiano Pineda wired back to Purechucho from roofing jobs in Florida coated his dirt floor with cement and paid for a home computer. Now, as the subprime mortgage crisis slows housing construction in the U.S., Pineda, 40, struggles to find work and can barely send enough money to his family in Mexico to buy the yogurt meant to help his 5-year-old son grow up strong.
The U.S. slowdown is compounding poverty in rural Mexico as jobless migrants struggle to pay for rent and groceries, let alone send money home.
The money Mexican migrants in the U.S. send home, known as remittances, nearly tripled over four years to $23.7 billion in 2006, but rose only 1% last year and fell slightly in the first three months of 2008, according to Mexico's central bank. Experts say tougher anti-immigration measures in some states have also made it harder for migrants to send back money. In a recent poll of 5,000 Latin Americans living in the U.S. by the Inter-American Development Bank, or IADB, 81% said it was harder to get a well-paying job than a year ago. Only half were regularly sending money home, compared with 73% in a 2006 survey.
Affording the Bare Necessities
Mexico accounts for more than half of all remittances from the U.S., and they represent Mexico's biggest source of foreign earnings after oil. The country's rural poor, who rely on the wire transfers for basic consumption, are reeling from the drop. "For the families who are receiving this money, it can (be) around a third of household income," says Robert Meins, an IADB remittance expert. "It's that third that helps many stay above the poverty line."
All around the western Mexican state of Michoacn, small towns and villages seem empty except for women, small children, and old people. The men are working mostly in the Southwest U.S. and Great Lakes.
In Purechucho, an isolated village of 1,500 inhabitants 200 miles southwest of Mexico City ringed by rugged desert mountains, heading north is a rite of passage. For decades money sent back has boosted living standards in this barren dust bowl of parched farmland dominated by cattle-raising. Multiple trips Pineda has taken illegally to the U.S. since his twenties to fit roofs in Delray Beach, Fla., have gradually turned a Spartan shack into a modest cinder-block house for his wife and four children, ages 5 to 20.
According to Pineda's 20-year-old daughter, student Alma Yazmn Pineda, his latest trip in April was meant to raise cash to install a flush toilet -- on previous trips he sent back as much as $600 a month. But he has struggled to find work and wired only $300. As the family scrambles to buy the basics, there is no demolition date in sight for their hated outdoor latrine. "They used to go to try and find a better life," Pineda says of migrants like her father. "Now they're going just to send enough for us to eat."
Plans Derailed
All around Purechucho is evidence of dreams put on hold by the U.S. slowdown. In the unpaved hamlet of Los Cuachalates, subsistence corn farmer Julin Calvillo, 65, sadly surveys a roofless bare brick construction site. His son, who worked in restaurants in Kansas City, Mo., had been wiring money to build a house. But he was fired because of the slowdown, has not been rehired, and has sent nothing for months. "We're all very sad," says Calvillo. "I'm borrowing from friends so that we can eat."
Migrants often dream of raising cash for a small business back home. But those left behind are pinching pennies, dooming many such enterprises to fail. Aquilia Ortega opened a cafe in the nearby town of Huetamo in February with $6,000 her husband Carlos earned as a solderer in North Carolina. But on a recent weekday, all the tables in the purple-walled cafe were deserted and she worried she would soon have to close. "There was nowhere to come and have a coffee, and we thought this would be a beautiful thing," she says. "We invested what he sent back, but it's disappearing because no customers are coming."
Even a crackdown on drug trafficking has been a mixed blessing. Michoacn is a major center for methamphetamine production and traffickers used to buoy the economy by splashing out on luxury goods. But an army crackdown by President Felipe Caldern has driven them underground and curbed their spending.
The American Dream Remains
Clara Ochoa, director for Michoacn state of the Mexican government's National Population Council, says news of the downturn was doing little to deter migrants who see even a U.S. in recession as a relative workers' paradise compared to places like Purechucho. A basic construction worker in the U.S. earns more than $20 an hour on average compared with about $14 a day in Michoacn.
With those stakes, says Ochoa, people ask themselves: "Why should we stay here suffering in this wilderness, in this desert, if we have a chance of a better life?"
"The American dream is still a reality," she says. "Even if the risks are higher." |
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