JALISCO REMAINS A LEADER IN REMITTANCES

UNCLAS GUADALAJARA 000327 SIPDIS SIPDIS DEPARTMENT FOR WHA/MX AND EB; EMBASSY FOR ECON, POL, MCCA AND USAID E.O. 12958: N/A TAGS: ECON ELAB SOCI MX SUBJECT: JALISCO REMAINS A LEADER IN REMITTANCES REF: 06 GUADALAJARA 80 ¶1. SUMMARY: When compared to other Mexican states, Jalisco is the third largest recipient of remittances from abroad, receiving nearly US$2 billion in 2006. In comparative economic terms for every dollar in foreign investment Jalisco received five dollars in remittances, and the total value was equal to half of the state government's budget during 2006. Given the scale of the remittance process (recent statistics indicate Jalisco receives five million transfers/year),local firms have entered the financial transfer market. With 1.7 million migrants residing in the United States, and over 120,000 households in the state receiving remittances, Jalisco's dependence on foreign financial transfers is likely to continue for the foreseeable future. End summary. -------------- - Cash Flows Have Broad Impact -------------- - ¶2. According to recent Banco de Mexico statistics, compared to other Mexican states, Jalisco continues to be the third largest recipient of remittances from abroad, following Michoacan and Guanajuato. During 2006 Jalisco received US$1.992 billion in remittances, representing an increase of 17.7% versus 2005. Jalisco's remittances also grew more rapidly than the national average (nationwide remittances increased 15.1% during the same period). Last year Jalisco gained an 8.5% share of the US$23 billion in total remittances sent to Mexico from abroad. ¶3. Remittances represent an important segment of the Jalisco economy. During 2006, remittances accounted for 4.9% of the state's total gross domestic product (US$42.4 billion). For every dollar of foreign investment received by Jalisco during 2006, the state received nearly five dollars in remittances. According to a local newspaper, remittances to the state virtually equaled total private domestic investment in Jalisco during 2006 (US$2.3 billion). Compared to government spending, remittances to Jalisco were worth about half of the state government's total budget (US$4.2 billion). -------------- A Growing Transfer Market: -------------- ¶4. The most recent detailed statistics on financial transfers are now available for 2005. During 2005 there were 4.97 million remittances to Jalisco. Financial transfers between migrants in the United States and family in Jalisco averaged US$341/transfer. Given the large scale of the transfer market, competition has grown and local businesses have also entered the sector (reftel). ¶5. Beyond the statistics, remittances have an enormous "human" impact on the people of Jalisco. According to an estimate from Consejo Nacional de Poblacion, there are 1.7 million people from Jalisco residing in the United States - roughly one quarter of the state's current population of 6.8 million people. In turn, these migrants remit money to 120,000 households in Jalisco, accounting for 8% of households in the state. Without these funds, many of these households (particularly in rural areas of the state) would be forced to go without basic life needs. -------------- COMMENT: No End in Sight: -------------- ¶6. COMMENT: Jalisco historically has been a major source of migrants from Mexico to the United States. Of the top states receiving remittances from abroad, only Michoacan is currently experiencing a decline in remittances. In Michoacan, remittances are a major component of the state's economy and the value of remittances in Michoacan (US$2.5 billion) is equal to 182% of total salaries in the state's "formal economy". But between 2005 and 2006, the amount of remittances received by Michoacan dropped 4.7% percent. Potential reasons for this include a possible decline in the state's population (Consejo Nacional de Poblacion estimates there was a decline in the Michocan population between 2005 and 2006) and/or plateauing numbers of migrants coming from the state. By comparison, Jalisco's population is growing and the pool of potential migrants remains large. As long as these social factors remain, combined with relatively stagnant economic development, Jalisco will remain heavily dependent on remittances from abroad. RAMOTOWSKI