Thread: Earnings don't stop at the border

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Earnings don't stop at the border
By Brenda Gazzar and Mason Stockstill
Staff Writers


Sunday, July 10, 2005 - The small amount of money Armando Acevedo Lopez sends home from an Inland Empire car wash is what primarily keeps his mother, who suffers from debilitating arthritis, alive in rural Michoacán, Mexico.


Lopez, 20, sends his mother at least $100 a month for food, clothes and medical expenses for her and her 14-year-old daughter.


His mother, confined to a wheelchair most of the time, does not work.


"It’s a help, because if it wasn’t for this boy, who would it be?" said Maria Guadalupe Acevedo Lopez, 40, from her small adobe home in the town of Tacátzcuaro. "Who would give me money to eat? Or I would have to go around asking for money."


Her son’s decision to send money home is one made every day by millions of people in America. Sixty percent of the 16.7 million Latin American immigrants here send money to another country every month, according to the InterAmerican Development Bank, a regional development institution for Latin America.


While immigrants have always sent money to family members in other countries, only in recent years have policy-makers and the finance industry taken note of how much money leaves and tried to capture a share of it.


That’s partly because the large volume of remittances flowing out of the country has significant effects on recipients and societies, said Manuel Orozco, senior associate at the Washington, D.C.-based Inter-American Dialogue.


"It increases demands of goods and services in the home country that under normal conditions wouldn’t have happened," Orozco said.


Where the money goes

On average, people who receive remittances invest more of their income than those who do not, Orozco said. That amount may be small, but it is still more than what would be invested otherwise.


Out of an estimated $20 billion that will be sent this year to Mexico from the United States, somewhere between $4 billion and $8 billion will go to wealth-generating activities such as opening or maintaining small businesses, Orozco said.


Assuming the pattern for immigrants in Southern California is the same as it is nationwide, that means more than 2.4 million people in Los Angeles, Riverside and San Bernardino counties send money to family members overseas. Statewide, the InterAmerican Development Bank estimates immigrants in California sent $9.6 billion to Latin American countries in 2004.


On the global level, immigrant workers sent $126 billion to families in their home countries in 2004, according to the World Bank. Of that, $37 billion flowed out of the United States and into Latin American and Caribbean countries.


As in most immigration-related issues, no country has greater ties to the United States than Mexico when it comes to remittances. In 2004, 18 percent of the residents of that country received $16.6 billion from family and friends working abroad, most of it from the United States.


That money represents a small fraction of Mexico’s $676 billion gross domestic product. But remittances have a significant impact on their mostly impoverished and rural recipients.


"They allow rural villages to survive when economically, they are not viable anymore," said Louis DeSipio, a professor of political science and Chicano/Latino studies at UC Irvine.


Without the money, those in Mexico’s depressed rural areas would face an even starker future, due to the lack of economic development, or would migrate to more urban areas of the country in search of work.


A cash commodity

Working in the United States is often a more attractive option because of the opportunity for better pay.


The same holds true for many developing countries, such as Honduras or Morocco, where remittances are crucial because there is little economic growth. In some nations, the average value of remittances collected by each recipient exceeds the entire per capita gross domestic product.


"More and more, we are beginning to see immigrants as the engines of economic growth in places of their origin," said Ali Modarres, a social studies professor at Cal State Los Angeles, in an e-mail interview. "These remittances create jobs and infuse their places of origin with much-needed money."


The money has value for the receiving countries’ governments, as well. Remittances can remain steady during difficult economic times, making it easier for recipients to get through recessions. For example, while the U.S. economy was in a downturn in 2001, money sent home by immigrants continued to grow.


Additionally, that money can quell political unrest in other countries, since poor workers who might otherwise turn to revolutionary tactics are able to survive on relatives’ earnings sent from America.


"It’s long been seen ... as a political safety valve for the Mexican government, and more recently Nicaragua and El Salvador," said Jaime A. Regalado, director of the Edmund G. "Pat" Brown Institute of Public Affairs at Cal State Los Angeles.


Heavy reliance on remittances in Mexico is manifested in programs that match funds sent home by immigrants when they are sent to specific community-development programs.


But experts caution that remittances are by no means a permanent path to financial security.


"Income inequality and social inequality are issues that are of a structural nature that remittances and migration cannot solve on their own," Orozco said.


A growing trade

Remittances have existed as long as immigration has, but only in recent years have many financial institutions developed the infrastructure for handling and tracking the financial exchanges. Additionally, remittance growth prompted organizations such as the World Bank to seek out better ways to steer the money toward investment and development.


Some see money-transfer fees as excessive, and at last year’s Special Summit of the Americas in Monterrey, Mexico, the United States and 33 other Western Hemisphere nations vowed to cut the cost of sending remittances to other countries in half by 2008.


A bill introduced by Rep. Luis Gutierrez, D-Ill., would require banks to inform customers about the availability of low-cost remittances. The legislation is pending in a House subcommittee.


Yet despite efforts to harness the billions of dollars in remittances for development and investment, the vast majority of the money is spent on day-to-day expenses.


A report from Inter-American Dialogue found that Mexican households receiving remittances spend 70 percent of it on routine items such as food and clothing. Just 10 percent of the money goes toward investment.


"They don’t have a developmental impact, as might be hoped, because they are used for consumption – that is by poor people ... for very basic food and household items," said Kathleen Newland, director of Migration Policy Institute.

Boo hoo hoo.

His mother, confined to a wheelchair most of the time, does not work.

And what is the Mexican government doing?

What they fail to mention is that the money is NOT being spent here.