Slowdown in Remittances Sent Home Creates Unforeseen Economic Investments for Some South American Countries

LatinaLista — There have been many consequences as a result of the crackdown on undocumented workers, none of it positive.
So it stands to reason, that since the main reason all undocumented workers from Mexico and Latin America are here is to work to send money home, that those remittances faithfully sent home to their loved ones would be jeopardized.
And they are. Owners of remittance businesses, like MoneyGram, have seen their businesses plummet. MoneyGram manager John Warner has reason to wonder if his business can survive: In the first quarter of 2006, growth was at 27.5%; today it stands at 3.4%.

While that kind of news is like the proverbial ax waiting to fall for U.S. remittance businesses, the country’s enforcement climate has created an unforeseen positive impact for the undocumented’s families back home.


It used to be remittances sent home enabled families to afford those items everyone takes for granted: a new TV, kitchen appliances, a new home, car, clothes, etc.
Unless someone was saving to build a house, remittances didn’t last very long. Today, thanks to the threat that every paycheck may be their last one, undocumented workers are sending less remittances home but the ones that are sent home are not being spent on new HD TVs.
According to a study sponsored by the Inter-American Development Bank, only half of today’s remittances are buying those consumer goods — the rest are going towards, of all things, investments.

In fact, the “not knowing what the future holds” has impacted, in a positive way, how undocumented immigrants and their families handle their money these days.
For example, in Mexico, 40% of the estimated $23 billion in remittances received last year was invested in housing, businesses and savings accounts. Of course, 57% still go towards those popular consumer goods but that’s a drop from 2003 when 78% of remittances went towards those same items.
The unforeseen boon to Mexico and Latin America because of this financial instability is that it has forced the people, WHO CAN AFFORD IT, to reprioritize and make their money pay for itself.

…Mexicans have been using remittances in four main areas, in addition to consumer goods and services. Construction, 8% (previously 5%); setting up small businesses, 5% (previously 1%); education, 13% (previously 7%), and savings, 14% (previously 8%).

In the long-term, these kinds of investments will not just make these families wealthier and more marketable but also strengthen their country’s economies.
When that happens, it will be up to these countries to reach out to their poorest residents and create the kinds of opportunities that force so many of them to embark on the most dangerous journey of their lives, in search of those opportunities that equalizes their standard of living with the rest of the world.
But until that happens, the poor will continue to come, regardless of immigration policy, not because they want to but because — they have to.

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6 Comments

  1. Horace said:

    And they say that cracking down on illegal immigration is like an ill wind that blows no one any good. Next on the agenda for unintended consequences, sending all illegal aliens back home to their respective homelands. I can see the title of Marisa’s next major headline, “Return of Undocumented Immigrants to Latin America Makes Their Governments Responsive to Their Constituencies, and More Accepting of the Need For Political, Economic and Social Reforms.”

  2. Frank said:

    Horace, Oh the horror, lol.
    Imagine that, Mexico and other countries having to be responsbile for their own.

  3. yave begnet said:

    The Economist had a recent article on remittances which proposed a different theory for why the growth rate is slowing (note that remittances haven’t decreased, they just aren’t growing as fast as before):
    All of these [housing slowdown, increased enforcement] may be plausible explanations. But the main reason for the slowdown is more prosaic: economists have become better at tracking the flow of remittances, because more of them than ever before are sent through easily traceable channels.
    In 1995 money orders sent by post accounted for 40% of remittances, says Mr Cervantes. Last year, they were just 4.5% of the total. The sending of cash has also declined. Instead, almost all the money heading south now does so electronically and so can be traced more easily. The heady growth rates of recent years were an exaggeration—mostly explained by the fact that more money was being counted. Now that the switchover has happened, growth rates are almost bound to decline.
    The article goes on to point out remittances only make up 3% of Mexico’s GDP, although much of that amount goes to the country’s poorest citizens where its impact is the greatest.
    I can’t believe ICE is waiting outside the MoneyGram stores, like crocodiles in the water hole. It’s becoming more and more clear to me one day we’ll look back on this time as a sordid chapter of our history comparable to Jim Crow.

  4. Frank said:

    Desperate times call for desperate tactics.
    I think it is against the law to send ill gotten booty out of the country no matter who the receiver is.

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