April 7, 2008

As Remittances Dwindle Mexican State Seeks Alternatives

Frontera NorteSur

In the Mexican state of Michoacan, remittances from migrant workers in the United States have played a key role in the economy of recent years. Now officials are concerned that the slackening of the migrant dollar boom could have negative repercussions on the local economy. To stave off negative effects from less in remittances, state officials plan to invest upwards of $50 million in alternative economic development programs.

In comments to the press after a meeting with businessmen, Michoacan State Economic Development Secretary Eloy Vargas Arreola said the administration of Governor Leonel Godoy, who is a member of the center-left PRD [Party of the Democratic Revolution], will tap into funds from both public and private sources as a means to create alternative economic possibilities for migrant-dependent communities.

Vargas affirmed that members of Michoacan's private sector are willing to invest in migrant-expelling regions of the state. A portion of the investment could be plowed into the operation of industrial parks, he added.

In his meeting with members of the Business Coordinating Council, Vargas underlined the importance of private investment in Michoacan's economy. The state official said the Godoy administration views small business as the motor of local development, followed by outside investment and the creation of new jobs.

Like other migrant-expelling regions of Mexico, Michoacan is vulnerable to the economic difficulties – especially in the construction sector which employed many Mexican migrants – and immigration restrictions currently prevailing in the United States.

In a report this week, the official Bank of Mexico noted that remittances from workers abroad, mostly in the US, fell by 2.76 percent during the first two months of 2008 compared with the same period of 2007. Sent in 9.8 million operations, this year's remittance averaged $343.21, or 0.02 percent less than the average remittance sent in January and February of 2007. Tracked by the Bank of Mexico, remittances for the first two months of 2008 totaled $3.39 billion. The latest figure reflected a noticeable slowdown from 2007, a year when remittances reached an annual sum of nearly $24 billion.

Taking into account the weak dollar, the remittance downturn is even worse than the official numbers suggest. In comparison to a few years ago, the dollar fetches fewer pesos, even as prices continue to escalate for all manner of goods in Mexico.

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Sources: El Universal/EFE, March 31, 2008. La Jornada (Michoacan edition), March 29, 2008. Article by Antonio Aguilera.

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Frontera NorteSur (FNS)
Center for Latin American and Border Studies
New Mexico State University
Las Cruces, New Mexico

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(Reprinted with authorization from Frontera NorteSur, a free, on-line, U.S.-Mexico border news source.  FNS can be found at http://frontera.nmsu.edu/)

Translation FNS