MIGRATION AND REMITTANCES PART IV: CROSS BORDER

UNCLAS SECTION 01 OF 02 MEXICO 002154

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 MX SMIG
SUBJECT: MIGRATION AND REMITTANCES PART IV: CROSS BORDER
INVESTMENT

REF: A. REF A: MEXICO 2042


B. REF B: MEXICO 2097

C. REF C: MEXICO 2123

Sensitive but unclassified, entire text.

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


1. (SBU) Summary. According to Mexican authorities, the
number of people immigrating illegally to the U.S. in the
first three months of 2006 grew to 275,792, an increase of 20
percent compared to the same time period in 2005. Many of
these migrants have traditionally lacked financial and
investment services, although there are a growing number of
cross-border programs which seek to capitalize on the growing
purchasing power of this demographic group. Without leaving
the U.S., migrants now construct houses in Mexico, save for
retirement, and even finance small businesses. Most
importantly, through these new investment opportunities in
the U.S., migrants may have new prospects of a better life
while creating economic development at home in Mexico. End
summary.

MIGRANT CONNECTION TO HOMELAND STILL STRONG
--------------


2. (SBU) Most migrants retain strong ties to their
communities of origin; according to a Pew Hispanic Center
survey, the vast majority of immigrants (71 percent) claim
they eventually intend to return. Alejandra Contreras, the
director of remittance services for the state of Michoacan,
agreed that the public expectation is that most migrants will
return. (Although in practice many migrant families remain
in the U.S. indefinitely.) Leonardo Hernandez, the mayor of
Cojumatlan, a rural community on the shores of Lake Chapala
in Michoacan, explained to Econoff April 6 his viewpoint that
migrants leave for two reasons - to support their families,
but also to save for a comfortable retirement in Mexico.


3. (SBU) As migrants' disposable income has grown, so has
their demand for investment opportunities. Ricardo Mejia, a
project manager for Construmex, Mexico's largest construction
company, told Econoff that "migrants no longer just want to
survive. They intend to come back to Mexico and find a
reward for their hard work." Building a quality home appears
to be a top priority for migrants - Mejia shared a Construmex
survey that found that while 56 percent of immigrants intend
to build a house within five years, only 18 percent are
actually doing so.

HAZLA PAISANO!
--------------


4. (SBU) Satisfying that need for home construction is the
aim of Construmex. In 2003, a subsidiary of the cement giant
Cemex inaugurated their "Hazla Paisano!" (Just Do It,
Countryman!) program marketed to migrants throughout the U.S.
The program has been a success - Construmex now has offices
located in 13 American cities with large Mexican populations,
and they intend to open 17 additional branches within five
years. According to Mejia, Construmex has grown its customer
base from 7,000 in 2004 to 18,000 in March 2006, with a goal
of 25,000 by the end of the year. Potential clients have the
option of visiting a branch office or ordering by telephone,
during which time they consult with an architect. After
finalizing their order, cement and other supplies are
delivered by a local distributor to a construction team of
the client's choice. Mejia described some of the advantages
of Construmex's program - low fees (USD 5 per project),fair
exchange rate (tied to Bank of Mexico's official rate),and
personal customer service. Payment plans are flexible, with
materials delivered as payments are made. Customers even
have the option of applying for credit, offered at an
interest rate of 9.9 percent, compared with rates of 20
percent or higher for much consumer credit. Construmex
spends very little on marketing, nearly all advertising is
via word-of-mouth.


5. (SBU) Migrant home construction can also provide a
significant boost to the local economy and employment. In
Pacambaro, a small community on the highway to Lazaro
Cardenas in the state of Michoacan, there were seven new

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Hazla Paisano construction sites, many standing in stark
contrast to the dilapidated shacks nearby. Alberto Ruiz,
manager of the Construmex distributor in Pacambaro, told
Econoff that branch revenue had increased by 52 percent since
2003, primarily due to the Hazla Paisano program. Jose
Lopez, an immigrant currently living in San Jose, California,
is expanding the size of his house near Morelia, the capital
of Michoacan, from 449 to 2254 square feet. According to
Lopez's wife, this construction will enable him to return to
Mexico, open an auto body shop, and hire three employees.
Lopez is also providing employment for several family members
who are building the home for him while he is the U.S.

YOUR LITTLE PIECE OF MEXICO
--------------


6. (SBU) The banking sector is also aggressively marketing to
migrants. "Your Little Piece of Mexico", a program offered
by Su Casita Hipotecaria, a leading Mexican mortgage lender,
allows migrants to qualify for a mortgage on a Mexican home
while working in the U.S. Manuel Spoor, Vice-President of Su
Casita, told Econoff March 23 that cross-border sales had
risen by 32 percent in less than a year, and by 2010 he
expects 10 percent of all mortgages provided by his company
to have originated north of the border. Contreras described
a joint program between the government of Michoacan and
Hipotecaria Nacional, Mexico's largest mortgage lender, to
provide low-cost mortgages to migrants. The trans-border
banking boom will probably not remain confined to mortgages.
HSBC Director of International Products Juan Lavalle
described for Econoff March 15 a variety of potential
products marketed to migrants, including auto and business
loans.

A CHRISTMAS CELEBRATION
--------------


7. (SBU) Breaking new ground for the public sector, the state
governments of Michoacan, Jalisco, and Guanajuato began a
pilot program in March 2006, allowing 200 migrants to invest
in a pine tree planting program. Under the guidelines of the
project, migrants provide 60 percent of the initial outlay of
approximately 9 million dollars (with the federal and state
governments covering the rest),funding the planting of 7,000
pine trees on 5 hectares of public land. The plan is
expected to provide long-term retirement income for the
migrants, who will be paid their return in annual
installments as the pines are gradually sold as Christmas
trees. Carlos Garcia, director of the Office of Migrant
Services for the state of Michoacan, explained to Econoff
that the program was conceived as a means of funneling
remittances into more productive enterprises that should
generate long-term economic development.

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


8. (SBU) The number of cross border investment programs
should continue to increase in the near term, offering
migrants growing opportunity to save and invest at home. The
accessibility of these programs is critical, for several
reasons. Remittances are Mexico's second largest income
source, with its rapid rate of growth not likely to slow in
the near future. Moreover, programs that channel migrant
income to productive ends, such as the Three-for-One program
(Ref C),and Hazla Paisano, appear to offer greater potential
for long-term economic development than ordinary remittance
transfers. Introducing and protecting policies which
encourage the exploitation of this income for sustained
economic development will likely be one of the incoming
administration's greatest challenges and opportunities.




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GARZA