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.

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Cash Flows Have Broad Impact
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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).

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A Growing Transfer Market:
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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.

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COMMENT: No End in Sight:
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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