MIGRATION AND REMITTANCES PART III: HOMETOWN

UNCLAS SECTION 01 OF 03 MEXICO 002123

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/MEX, WHA/EPSC, EB/IFD, AND EB/EPPD
STATE PASS USAID FOR LAC: MARK CARRATO
TREASURY FOR IA MEXICO DESK: JASPER HOEK
COMMERCE FOR ITA/MAC/NAFTA: ANDREW RUDMAN

E.O. 12958: N/A
TAGS: ECIN ECON EFIN EINV SMIG MX
SUBJECT: MIGRATION AND REMITTANCES PART III: HOMETOWN
ASSOCIATIONS, LOCAL GOVERNMENT, AND ACCOUNTABILITY

REF: A. MEXICO 2042


B. MEXICO 2097

Sensitive but unclassified, entire text.

This is the third in a series of four cables examining the
effect of U.S. migration and remittances on the economy of
rural Mexico.


1. (SBU) Summary. There has been a significant growth in the
influence of migrant organizations based in the U.S., often
known as "hometown associations" (HTAs). While Mexican
immigrants have long supported their communities of origin,
HTAs are now larger and better organized, and increasingly
able to affect municipal and state policies. HTA
contributions enable significant infrastructure improvements,
encourage greater accountability and transparency on the part
of local government, and may be more effective in stimulating
economic growth than family remittances. Given its vast
potential, encouraging the growth of hometown association
investment is likely to remain a top priority for the
incoming administration. End summary.

A TOP PRIORITY
--------------


2. (SBU) Realizing its economic promise, state and local
governments are devoting more resources to promote HTA
investment. Michoacan, a state that receives more than 15
percent of its GDP from remittances, created a new department
solely for this purpose in 1990. Most other states have
followed suit, with 26 out of 32 now having separate
departments devoted to addressing migration issues. In 2000,
the Migrant Assistance Office's responsibilities were greatly
expanded by mandate of the current governor, Lazaro Cardenas.
Carlos Perez, director of the Office for Migrant Assistance,
told Econoff on April 4 that he believes that Mexican policy
makers cannot underestimate the influence of HTAs, and that
encouraging and leveraging hometown association investment is
a top priority for the government of Michoacan. As an
illustration of its importance, Perez pointed out that while
the state economy grew by 3.4 percent in 2005, remittance
income grew by 16 percent during the same time period.
Attracting HTA investment is not only a priority for state
government; the federal government created the Three-for-One
initiative in 2002 for this purpose. Moreover, numerous
municipalities now have programs designed to encourage HTA
contributions.

INFLUENCE OF MIGRANT ASSOCIATIONS
--------------


3. (SBU) It would be difficult to overestimate HTA influence
in Michoacan. According to Perez, there are an estimated 1.3
million Michoacanos in the U.S., increasingly represented by
groups with hometown connections. In Chicago, the Federation
of Michoacanos in Illinois claims to represent 35 clubs and
over 1,000,000 citizens of Michoacan, an increase of 20
percent in 2005. Their organizational purposes may also be
changing. Eneida Martinez, Coordinator of Foreign Services
for Michoacan, explained to Econoff on April 4 that when she
began working with migrants in 1990, HTAs were primarily
social clubs. Today, however, they are organizing to serve
primarily a political and economic role. Martinez also
described the active recruiting programs of many HTAs, many
of whom enlist new members before they leave Mexico. Nearly
every town in Michoacan, no matter how small, has at least
one HTA. Cojumatlan, a town of 5,000 residents, has one,
while Venustiano Carranza, a farming community of 50,000
residents, has three. Since most migrants in the U.S. earn
five to ten times the average salary in Mexico, HTAs normally
have sizable financial resources relative to their home
communities.

THE THREE-FOR-ONE PROGRAM
--------------


4. (SBU) The Mexican Government's Three-for-One
(Tres-por-Uno) program has partially funded thousands of
community development projects nationwide since its origin in

2002. The program provides state and federal matching funds
for projects proposed by HTAs and municipal governments, who
are required to present a proposal to a state panel tasked
with recommending approval or disapproval. According to

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Martinez, 64 percent of submitted proposals were approved in
2005, compared to 71 percent in 2004. Martinez also
explained that the panel normally prioritizes basic
infrastructure improvement projects, such as road paving.
However, this precedence has evolved over time. In
Michoacan, 57 percent of proposals approved in 2002 were
beautification works such as the renovation of a church or
town plaza, but by 2005 this percentage had fallen to 23
percent. The program also continues to grow in popularity,
with the number of statewide projects rising from 65 in 2002
to 148 in 2005.


5. (SBU) The program is also fundamentally changing the
nature of relationships between migrants and their
communities of origin. The Secretary of the City Council in
the town of Venustiano Carranza, Sergio Gudino, is the
primary liaison between the municipal government and
Venustiano Carranza's hometown association in Winter Garden,
CA. Gudino explained that although the relationship is
usually harmonious, conflicts occasionally arise. Because
the city works budget is extremely small, the city council
tends to emphasize practical projects, such as irrigation,
instead of the beautification works sometimes favored by the
HTA. While disagreements are quickly resolved, the hometown
association often holds a veto over major decisions. The
city council in Venustiano Carranza also routinely consults
with HTA representatives after council meetings.


6. (SBU) By requiring municipal authorities to collaborate
with non-state entities in the design, funding, and
implementation of community projects, Three-for-One is
forcing a higher level of responsibility and transparency in
many areas. Martinez cited several cases in 2005 where HTAs
protested the non-competitive selection of higher-priced
contractors and achieved significant cost savings for their
project, a new phenomenon in many areas of rural Michoacan.
Officially, local leaders all stated to Econoff that they
welcomed the involvement of their HTA. The reaction among
townspeople was even more supportive.


7. (SBU) Decisions regarding funding for infrastructure
projects traditionally have been made in Mexico City. As a
result, many rural areas of Michoacan have lacked sufficient
funding to undertake meaningful development projects.
However, through Three-for-One, which is driven by HTA and
municipal interest, many rural areas have seen a dramatic
increase in federal and state resources. An example is
Venustiano Carranza. According to Gudino, there were only
three state and zero federal works projects in their
municipality from 1993-2002. Since 2003, through
Three-for-One, there have been four projects, with seven
others already planned for 2006.

INDEPENDENT PROJECTS
--------------


8. (SBU) Not all contributions by HTAs take the form of
Three-for-One proposals; municipal leaders also solicit for
independent project funding. Leonardo Hernandez, the mayor
of Cojumatlan, travels to California three times a year to
visit Cojumatlan's hometown association. The HTA has
provided significant financial support for local projects,
such as the purchase of a school bus and a computer training
center. In Tanaco, a small town known for its production of
wooden clocks, local leaders solicited funding from their HTA
to construct a new community woodworking shop. With the
influence of HTAs likely to increase, cross-border
cooperation will become increasingly important in order to
provide opportunities in economically depressed areas.

COMMENT
--------------


9. (SBU) Programs such as Three-for-One may be more
successful than remittances alone in stimulating economic
development, although this has been the subject of debate.
For example, a recent study conducted by Michigan State
University in conjunction with USAID showed that 22 percent
of guava farmers funded their initial orchard through
remittance income, suggesting that remittances play an
important role by encouraging small business. On the other
hand there is significant anecdotal evidence that remittances
are often used as a substitute for declining agricultural
income. Of the twenty-two remittance recipients interviewed

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in rural Michoacan and Guanajuato, eighteen spend the money
primarily on basic necessities, such as food or medical
treatment. Moreover, while recognizing the critical lifeline
remittances provide, municipal leaders tended to emphasize
the tangible long-term benefits of Three-for-One projects,
such as the proposed fish oil processing plant in Venustiano
Carranza which may create 200 new jobs. Every region faces
specific opportunities and challenges, however, in many
communities economic progress has not kept pace with the
record amount of remittance income, as evidenced by the
growing number of emigrants.


10. (SBU) HTA programs also have the potential to transform
rural Mexico in several other ways. First, HTA contributions
provide resources for infrastructure improvements in areas
traditionally neglected by federal and state authorities.
Furthermore, HTA involvement appears to encourage
accountability, transparency, and decentralized decision
making. Increased migrant influence and contribution is not
a magic solution for Mexico's economic woes. However, their
positive impacts may have multiplier effects that facilitate
greater mobilization and change in the future. If other
groups in rural areas also begin to demand the same standards
of accountability from all levels of government, the impact
of HTAs will have gone far beyond the projects themselves.



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KELLY