Money and Jobs Lost to Mexico

July 14, 2008

Tom Barry

 

The United States is shutting its doors to immigrants. It’s not alone. The European Union recently announced a stiff immigration regime that like the immigration crackdown in the United States is blocking new flows of immigrants and detaining and deporting those without the proper documents.

 

Throughout the country, deportations have sharply increased this year -- up 40-50% in most sectors. At the same, the combination of more Border Patrol, fences, and criminalizing illegal border crossers are dramatically slowing down northbound migrant flows.

 

A slowing U.S. economy and the intensifying immigration crackdown are starting to shake the Mexican economy. One of the first warning signs that Mexico may soon face economic and social turbulence is the slide in remittances.

 

Mexico’s central bank recently released figures showing that remittances from Mexicans working abroad fell 2.6% during the first five months of 2008. While not a dramatic downturn, the decrease in remittances – which constitute the country’s second largest source of foreign exchange (after oil) – is worrisome because these funds from emigrants have since the mid-1990s become a pillar of Mexico’s economy.

 

Remittance income continued to grow through 2007 – up 1% from 2006.  But total remittances in 2008 are likely to be sharply negative.

 

Also cause for concern is the apparent escalating drop in remittances. In May, remittances were down 3.4% from May 2007 – signaling that remittances may be dropping faster each month.

 

The country’s dependence on remittances is almost exclusively a dependence on family members living in the United States. According to the central bank, the United States is home to 98% of the Mexicans living abroad.

 

The construction industry, which used low-wage Mexican labor as a foundation for the housing boom since the early 1990s, is tanking, leaving hundreds of thousands of Mexican men without jobs. As new figures released by the central bank demonstrate, remittances over the past several years have closely parallel the up and downs of the construction industry, both dropping steadily over the past two years. 
 

Aside from the amounts involved, little is known about historic patterns of remittances. But the recent downturn in outflows of dollars to Mexico, combined with projections of a continuing downward economic spiral in the United States through next year at least, don’t auger well for Mexico – which in 2007 captured a record of $23.9 billion in remittances.

 

Not only are Mexicans who are currently living in the United States cutting back on the money they send to Mexico, but the Mexican population may be leveling off as a result of the immigration crackdown.

Measured by decreased apprehensions of border crossers, migration from Mexico into the United States is slowing dramatically. In the U.S. Border Patrol’s El Paso sector, apprehensions are down 58% from last year. The Border Patrol says the decline is due to more border barriers, increased agents, and zero-tolerance policies that send illegal border crossers to jail.

"We've never had the reductions in apprehensions that we are seeing today," said Rick Moody, director of the Border Patrol’s station in Deming, NM. The influx of immigrants has slowed to a trickle along increasing section of the border. Immigrants waiting to cross no longer gather in the central plaza in Palomas, the Mexican town south of Deming. On a recent day, not one immigrant was picked up, said Moody.

Even in the best of times, Mexico has proved unable to create the one-million plus jobs needed for those entering the workforce each year. But emigration to the United States has until recently provided an escape valve, an outlet to keep social and political tensions down.

The Mexican government estimates that more than 400,000 citizens migrate to the United States annually. But recent apprehension rates put this estimate in question.

Without remittances and without an external source of jobs, Mexico faces an increasingly grim future.

 

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