The Cost of Immigration - Remittances—the Flow Of Money Out Ofthe United States To Latin America

In an opinion article titled "Mexicans in the U.S. Send Billions Home—And It All Comes Back," for the Rocky Mountain News (February 19, 2005), Benjamin P. Gochman and Rutilio Martinez, of Consulting Group of the Americas LLC, stated that "[i]n 2004 Mexicans working in the U.S. sent back $16.4 billion to their families in Mexico. This number is expected to top $19.2 billion by the end of 2005. Money transfers (called remittances) to families in Mexico from relatives in the U.S. have surpassed foreign direct investment as the second most important source of revenues for Mexico after oil (Bank of Mexico, 2004)."

Gochman and Martinez reported that interest on Mexico's $136 billion debt with U.S. banks, plus profits returned to the United States by American corporations in Mexico, averaged over $14 billion per year during the years 1995–2003. Until 2003 the return of this money was enough to offset the remittances sent to Mexico. In 2004 the amount of remittances surpassed the amount returned to the United States from Mexico. The authors suggested, however, that the remittances would, in part, increase spending by Mexican citizens in U.S. border towns. They argued that with increased border exports of goods to Mexico, the American economy would not be adversely affected. Border exports included consumer goods, used cars, firearms, capital goods such as agricultural machinery, and a small number of luxury cars. While the U.S. Department of Commerce did not register these as exports, the U.S.–Mexico Chamber of Commerce estimated border exports at $20 billion in 1998. Remittances sent to Mexico had become the main source of income for many Mexican families. Gochman and Martinez argued that these families were part of the middle and upper class who made regular shopping expeditions to U.S.-border or near-border towns. They opposed a proposal to tax remittances as this would not only "adversely affect Mexico's poor and working class families" but would reduce the growth rate of American exports to Mexico.

Marcela Cortes, writing for EFE News Service ("Illegal Mexican Immigrants Send the Most Money Home," http://www.efenews.com, December 17, 2004), cited a study by Banco de Mexico that indicated that 83% of the remittances sent to Mexico came from illegal immigrants, most of whom were working in the United States. The study found that Mexican migrants sent home $13.8 billion between January and October 2004, an increase of more than 23% from the same period of 2003. Ms. Cortes quoted Carlos Villanueva, chairman of the Association of Mexicans Abroad, who said, "Remittances are estimated to total $17 billion this year, but such figures come up short because they do not take into account nontraditional ways of sending money, such as services or in kind. It is a fact that remittances are the top driving force of the Mexican economy."

The Value of Remittances to Families Back Home

The May 2004 report Sending Money Home: Remittance to Latin America and the Caribbean, produced by Inter-American Development Bank (http://www.iadb.org), provided an interesting analysis of remittances. The report noted that "one aspect of globalization … has attracted relatively little attention: the flow of workers to fill jobs in more developed countries, and the subsequent financial flows back to their families in countries of origin … delivering desperately needed resources … to more than one hundred million families worldwide." According to the report this phenomenon is nowhere more apparent than in Latin America and the Caribbean.

While migrants have traveled to other Latin American countries, Europe, and most recently to Japan, for the past two decades the overwhelming migration has been to the United States. According to the Inter-American Development Bank report, "in 2003 remittance floes exceeded all combined Foreign Direct Investment and Official Development Assistance to the Region (Latin America and the Caribbean) … and accounted for at least 10% of gross domestic product in Haiti, Nicaragua, El Salvador, Jamaica, the Dominican Republic, and Guyana." Remittances to Mexico exceeded total tourism revenues, and equaled more than two-thirds of the value of petroleum exports and about 180% of total agricultural exports.

The report also cited a survey by the Pew Hispanic Center (Remittance Senders and Receivers: Tracking the Transnational Channels, Washington, DC, 2003) in which half of Latino migrants in the United States who had been away from home five years or less reported that they sent remittances home. After migrants were in the FIGURE 6.4
U.S. foreign-born Latinos who send money home, by number of years in the U.S.
SOURCE: "U.S. Foreign-Born Latinos: Who Sends Money Home," in Sending Money Home: Remittance to Latin America and the Caribbean, Inter-American Development Bank, Multilateral Investment Fund, May 2004, http://www.iadb.org/mif/V2/files/StudyPE2004eng.pdf (accessed March 15, 2005) FIGURE 6.5
Percentage of adults receiving remittances
SOURCE: "Percentage of Adults Receiving Remittances," in Sending Money Home: Remittance to Latin America and the Caribbean, Inter-American Development Bank, Multilateral Investment Fund, May 2004, http://www.iadb.org/mif/V2/files/StudyPE2004eng.pdf (accessed March 15, 2005) United States ten years, the likelihood of sending remittances began to decline gradually. However, about 10% of those who had been in the United States for more than thirty years still sent remittances. (See Figure 6.4.)

Some 28% of adults in El Salvador and 24% of adults in Guatemala received remittances from family members who left the country to find work. In Mexico remittances arrived for 18% of adults. (See Figure 6.5.) Most workers sent remittances at least once a month. In FIGURE 6.6
Spending remittances
SOURCE: "Spending Remittances," in Sending Money Home: Remittance to Latin America and the Caribbean, Inter-American Development Bank, Multilateral Investment Fund, May 2004, http://www.iadb.org/mif/V2/files/StudyPE2004eng.pdf (accessed March 15, 2005) Mexico 78% of remittance funds were spent on household needs (housing, food, and utilities), 7% on education, and 8% to savings. Most Mexican recipients of remittances spent just 4% of funds received on luxury items. (See Figure 6.6.)

In its Survey of Mexican Migrants, Part Two: Attitudes about Voting in Mexican Elections and Ties to Mexico, released March 14, 2005, the Pew Hispanic Center in Washington, D.C., reported that 78% of Mexican migrants sent remittances. The survey also explored the close ties that Mexican migrants maintained with family back home. Fifty-four percent of migrants surveyed said they spoke by telephone to their families in Mexico at least once a week. Of those who had been in the United States ten years or more, close to half (46%) said they were still in weekly contact with family in Mexico. Among the primarily younger and more educated migrants surveyed, 17% said they maintained regular contact with their families by computer.