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Column 060407 Wall

Monday, June 4, 2007

Mexican Emigration Versus Economic Development

By Allan Wall

Each year Mexicans in the United States send billions of dollars in remittances back to Mexico.  In 2006, Mexicans working north of the border sent back US$23 billion.  Remittances have become (after petroleum) the second highest legal source of income for Mexico.  And that’s one of several reasons why Mexican leaders don’t want emigration to end.

But are these billions of dollars really helping Mexico?

You might think so, but if you look at the Mexican regions that receive high levels of remittances, they’re not exactly booming economically.

Take for example Michoacan, President Felipe Calderon’s home state. That state is the highest recipient of remittances, with 11.2 percent of its families receiving them.  Nevertheless, Michoacan is still one of the more economically undeveloped states in Mexico.  Other high-remittance receiving states have also failed to develop.

The United Nations Population Fund (UNFPA) did a study of the phenomenon, and according to spokesman Alfonso Sandoval the study determined that remittances in Mexico are not developing the country economically.             

Most of the remittance money is spent on groceries or daily expenses, buying fancy vehicles, or remodeling houses.  But little of it is being invested in permanent job-generating enterprises.  Therefore the regions aren’t advancing economically.

Remittances also encourage some Mexicans not to work, since they can earn more from remittances than working on a Mexican job.

Mexico’s central bank, the Banco de México, has examined this issue.  A 2005 study by the bank showed negative correlation between remittances and development.  In other words, the more remittances the less development!

It suggested that this dependence on remittances was itself a cause of poverty, since it gave recipients fewer incentives to seek other sources of income.

Remittances even encourage more emigration.  Remittance receivers in Mexico are more likely to want to emigrate than those who don’t!

So what’s really being accomplished here?

Not only is emigration of dubious economic value, its social costs are great.  It exacerbates family disintegration and sometimes encourages deadbeat dads to abandon their families.  Mexican congressman Jose Edmundo Ramirez admitted the problem in Washington, in February: “In addition, [Ramirez] said that ‘one Mexican per minute is leaving his family’ to go to the United States, which disintegrates families and leads to other problems such as alcoholism and drug addiction.”

Psychologically the pull of emigration is strong, and according to polls nearly half the population would emigrate if possible!

Emigration has become a national obsession.  It’s really a shortcut to avoid dealing with the real problems in Mexico.  It weakens the Mexican family and local communities.  It impedes economic development, because the emigration mentality has permeated the whole society. “Why make things better in Mexico when people can just emigrate?” is the mentality.  Emigration is like an addictive drug, and the addict needs ever-larger doses for his fix.

Generally speaking, Mexican emigrants are not the poorest of the poor.  They’re usually from the upper tier of the poor, with a growing proportion of middle class Mexicans.  In the Mexican schools in which I’ve worked, I’ve had co-workers who already had jobs but emigrated for more money.

Visiting Dallas last year, Banco de México chief Guillermo Ortiz said that tougher enforcement on the U.S. side “would be better over the long run” for Mexico.

Mexican vested interests, however, can be expected to oppose meaningful reform.  The world’s second-richest man, Mexican Carlos Slim, and Mexico’s other billionaires are happy with the status quo. 

Mexico’s own Constitution makes some reforms difficult, so it would need to be amended.  And real reforms would be quite controversial.

That doesn’t sound like much fun for Mexican politicians, so they continue in the status quo, hoping Mexicans will continue to emigrate.

Additionally, in a country with a 40 percent (or more) tax evasion rate, the oil monopoly PEMEX is used as the government’s de facto tax collection agency at the gas pump.  In 2006, 93.2 percent of its profits were used for government programs, which means not enough is left for oil exploration and processing.  Meanwhile, Mexico’s biggest source of oil, the Cantarell field, is in decline, PEMEX is in debt, and restrictive foreign investment laws prevent exploitation of that hard-to-get-to deep oil in the Gulf of Mexico.  So PEMEX is in trouble, but reforming it would be contentious.

Therefore, Mexico’s leaders remain committed to keeping Mexicans moving north, which takes pressure off them to reform the economy.  What a shame for Mexico and her people.

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Allan Wall, a MexiData.info columnist, recently returned from a tour of duty in Iraq.  He currently resides in Mexico, where he has lived since 1991. He can be reached via e-mail at allan39@prodigy.net.mx.