Mexican workers send less cash home from the US

Over the past decade, entire towns in Mexico have been rebuilt with money sent from immigrants or migrant workers living in the US.

Now, for the first time since Mexico's Central Bank began keeping records (13 years ago), total annual remittances from the US have fallen.

The numbers themselves, released by the Central Bank on Tuesday, are not dramatic. Mexicans sent $25 billion to their families in 2008, down from $26 billion the year before, representing a 3.6 percent decline.

But the break in the trend is significant, say economists. Less cash coming to low-income families who then spend it on goods and services, will mean more frugal spending, which will in turn be a further drag on the Mexican economy this year. And it will impact millions of families whose entire incomes depend on the dollars sent from men and women working as construction workers, lettuce pickers, and housekeepers from California to New York.

"This translates into social pressure," says Heliodoro Gil Corona, an economist at the School of Economists in the Mexican state of Michoacán. "It means a lack of employment. It means a lack of income. It even means more crime and insecurity."

Mexico's economy is in much better shape than in previous global economic downturns. While GDP is expected to remain stagnant or shrink here this year, in the past, when the US was in a recession, the economy south of the border quickly followed.

Even though Mexico sends up to 80 percent of its exports to the US and Canada, it has been cushioned somewhat by having corrected macroeconomic imbalances, such a fiscal deficit, external deficit, and high inflation, says Alfredo Coutino, a senior economist for Latin America at Moody's Economy.com.

But a drop in remittances, which represent the largest source of foreign income in Mexico after oil exports, is a worrisome trend – one that economists expect will trend further downward this year.

The impact on towns in Mexico's agricultural heartland, such as Michoacán, Guanajuato, and Zacatecas – where migration to the US is the highest – is already being felt.

In 2005, Michoacan state received $2.6 billion in remittances, which dropped to $2.2 billion last year. Economists predict a continued drop to $2.1 billion this year.

According to Banco de Mexico, the average remittance in 2006 was $350 a month.

Leticia Calderon Chelius, a migration researcher at the Mora Institute, a public research group in Mexico City, says that's a significant sum considering that the average Mexican worker's monthly minimum salary is $115, she says.

The poorest Mexicans are not the most affected – those in extreme poverty do not tend to be economic migrants. Rather the decline in remittances touches those families another rung up the economic ladder, those who depend on money to build better homes, buy books for their children and medicine for their elders.

Ms. Calderon Chelius says she does not expect a mass return of Mexicans back home, because the economic outlook is not bright here either. But some demographic shift has been registered already. Mr. Gil Corona says that according to a recent state survey in Michoacan, the state that receives the most money from migrants in the US, according to central bank statistics, some 20,000 residents stayed here after the Christmas holiday season instead of returning back to the US.

The slackened economy in the US is a major factor in the decline in remittances, especially from the construction industry, which has traditionally employed some 20 percent of Mexican migrants. But tougher immigration enforcement and anti-immigrant sentiment is also playing a role, says Calderon Chelius.

In a survey carried out by the Inter-American Development Bank last year, some 81 percent of migrants from Latin America reported more trouble finding well-paid jobs from the year before. As a result, only 50 percent of Latin American migrants, two-thirds of whom are Mexican, were sending home remittances on a regular basis, compared to 73 percent two years prior.