Identifier
Created
Classification
Origin
08MONTERREY489
2008-10-30 18:18:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Monterrey
Cable title:
FALLING REMITTANCES HIT NORTHERN MEXICAN FAMILIES HARD
how-toVZCZCXRO9371 PP RUEHCD RUEHGD RUEHHO RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM DE RUEHMC #0489/01 3041818 ZNR UUUUU ZZH P 301818Z OCT 08 FM AMCONSUL MONTERREY TO RUEHC/SECSTATE WASHDC PRIORITY 3226 INFO RUEHME/AMEMBASSY MEXICO PRIORITY 4248 RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE RUCPDOC/DEPT OF COMMERCE WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHINGTON DC RUEHMC/AMCONSUL MONTERREY 8743
UNCLAS SECTION 01 OF 03 MONTERREY 000489
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: SOCI ECON EFIN PGOV CVIS MX
SUBJECT: FALLING REMITTANCES HIT NORTHERN MEXICAN FAMILIES HARD
MONTERREY 00000489 001.2 OF 003
UNCLAS SECTION 01 OF 03 MONTERREY 000489
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: SOCI ECON EFIN PGOV CVIS MX
SUBJECT: FALLING REMITTANCES HIT NORTHERN MEXICAN FAMILIES HARD
MONTERREY 00000489 001.2 OF 003
1. (U) Summary: After years of steady increases in remittances
sent by Mexican workers in the U.S. to their families in Mexico,
the current U.S. economic slowdown has caused a sudden drop in
such payments. The decline in remittances stems from the
concentration of Mexican workers in the construction sector and
other industries affected by U.S. economic problems. Here in
Northern Mexico, local government officials, bankers,
businessmen, academics and social workers all report that
numerous factors, including a dramatic shift in remittances from
Mexican nationals working in the U.S., are contributing to
economic dislocation in the region. However, our contacts do
not believe that declining job prospects in the U.S. will result
in reverse migration back to Mexico, but rather most workers
will stay in the U.S. in lesser paying jobs. End Summary.
DECLINE IN REMITTANCES ACROSS MEXICO
-------------- --------------
2. (SBU) According to a regional representative from the
central Bank of Mexico, remittances sent from Mexicans working
in the United States declined seven percent from the third
quarter of 2007 to the third quarter of 2008. This is the first
such annual decline recorded since the bank began collecting
this data in 1999, and represents a dramatic downturn from
record increases of 25 percent observed in 2006. The adverse
economic effects of this sudden change are substantial.
Remittances to Mexico in 2007 amounted to almost $24 billion,
roughly equivalent to the rate of direct foreign investment in
the same year. In comparison, Mexico garnered $38 billion from
oil exports and $13 billion from tourism in 2007.
3. (SBU) The Bank of Mexico conducts detailed demographic
surveys of workers who send remittances and the families that
receive them. The latest survey shows that two-thirds of
Mexicans working in the U.S. regularly send monies home, with
the primary recipients being parents (69 percent) followed by
spouses (12 percent). Over half of the workers earn $1000-$2000
monthly; another third earn over $2000. The amount sent home
monthly averages over $430 for recent arrivals (less than 5
years),but declines over time to $340 for long-term workers (11
years or more). Over two-thirds of workers sending remittances
have no high school education. Over half of the workers have
two to four dependents living with them in the U.S. The survey
showed that 86 percent of the money sent is used for basic
maintenance and consumption; six percent is used for education;
and only one half of one percent is used for community
improvements or small business development.
4. (SBU) Mexican nationals working in the United States
gravitate towards three sectors: hospitality and food services
(54 percent),construction (23 percent) and manufacturing (14
percent). The heaviest decline in employment over the past year
has been in the hard-hit construction industry. However, the
unemployment rate for Mexicans in the United States has only
inched up from five to seven percent, suggesting that they have
left the United States or moved to other jobs. The report from
the Bank of Mexico indicates that the decline in construction
employment tracks very closely with the drop in remittances.
CRISIS IMPACTS NORTHERN MEXICO
-------------- --------------
5. (SBU) Economic dependence on income from workers in the
United States varies across Mexico, with the rural southern and
central states being far more susceptible than the north to any
disruption in remittances. The most vulnerable states are
Michoacan (10.4 percent of GDP from remittances),Oaxaca (8.2
percent),Zacatecas (7.8 percent),Guerrero (7.6 percent) and
Hidalgo (7.2 percent). In the more industrialized areas of the
northern border region, the economic displacement of Mexicans
from rural to urban areas is a larger concern than the drop in
remittance income. The north-eastern state of Nuevo Lesn
receives less than one-half of one percent of its GDP from
remittances, but state officials report that social services are
increasingly stressed by migrants from the neighboring rural
MONTERREY 00000489 002 OF 003
states of Tamaulipas, Durango, and Zacatecas.
6. (U) Of the north-central states, Zacatecas has felt the
strongest economic impact. Millions of Zacatecans live and work
in the U.S., with large concentrations in Dallas, Oklahoma City,
Los Angeles, and Chicago; we understand that half the
native-born population of Zacatecans lives in the United States.
A representative from Zacatecas reports that the decline in
remittances is having a dramatic effect on the rural populations
in his state, reducing discretionary spending and forcing many
families to return to subsistence agriculture. As families cut
back on spending, service industries have suffered a
corresponding loss of income, sending ripple effects through the
local economy.
7. (U) Rural areas of Durango are also experiencing economic
dislocation. During a recent consular visit to the town of
Santiago Papasquiaro, the mayor complained of a 30 percent drop
in attendance at the town's annual harvest festival. He
related that in previous years, many migrant workers would
return to the area from the U.S. to attend the fair, and bring
their families along. This year, very few workers could afford
the trip, and those that did had less money to spend. The local
shops and restaurants were also suffering, as local families had
less disposable income.
8. (U) The decline in remittances has also affected the
Mexicans families ability to pay their bills. A contact in the
collection department of a large U.S. credit company reports
that delinquent payments are much higher because the families
receive their money to pay the credit card bills from
remittances.
9. (U) Cemex, a leading cement producer headquartered in
Monterrey, sponsors several philanthropic programs to aid
low-income families in Mexico. The Construmex program allows
Mexican workers in the U.S. to purchase cement and other
construction materials for their families back in Mexico to make
`self-help' improvements to their homes. During a recent
international conference on philanthropy in Monterrey, a Cemex
executive revealed that participation in this program had fallen
by 20-30 percent over the past year.
IMPACT ON IMMIGRATION AND TRAVEL TRENDS
-------------- --------------
10. (U) Applications for non-immigrant visas in 2008 are down
in every post in Mexico with the exception of Ciudad Juarez (the
increase in Ciudad Juarez is attributed to an anticipated surge
of visa renewals, echoing a 1998 surge of applications for the
then-new border crossing card). An analysis of visa trends from
Mexico, presented at the recent Mexico consular chiefs
conference in Monterrey, reveals that visa application levels
have historically tracked very closely with the state of the
American economy. Recent increases in application fees, coupled
with increases in Mexican passport fees have also contributed to
this decrease in visa demand, as the overall cost of applying
for visas becomes out-of-reach for many low-income Mexican
families. Concurrently, approval rates for non-immigrant visas
in Monterrey have increased inversely to the number of
applications, indicating that many economically marginal visa
applicants may now be `self-selecting out.'
11. (U) Despite scattered anecdotal reports to the contrary,
authorities in Mexico do not anticipate a surge in returning
workers. Many of the Mexican nationals in the U.S. who have
recently lost jobs due to the economic downturn have very little
economic incentive to return to their homes in Mexico, where job
conditions are often much worse. Instead, most are expected to
seek jobs in the U.S. further down the income scale, moving
from the construction and industrial sectors to agriculture or
food service. The rare exceptions to this trend are generally
recent immigrants from the middle class, who have found that the
job market in the U.S. was not as welcoming as in past years,
MONTERREY 00000489 003.2 OF 003
and who may still have economic opportunities in Mexico.
COMMENT
--------------
12. (U) Comment. The economic crisis in the United States
will continue to bring repercussions to Mexico in the form of
decreased remittances, tourism, and direct foreign investment.
While the industrialized northern regions of the country are
less susceptible to negative effects from a decrease in
remittances, the ripple effects from decreased foreign
investment and increased internal displacement will be strongly
felt in all urban areas. First-time visa applications and
immigration to the U.S. -- both legal and illegal -- will likely
continue to slow from recent historical highs, although it
appears unlikely that we will see any large-scale reverse
migration in the near term. End Comment.
WILLIAMSON
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: SOCI ECON EFIN PGOV CVIS MX
SUBJECT: FALLING REMITTANCES HIT NORTHERN MEXICAN FAMILIES HARD
MONTERREY 00000489 001.2 OF 003
1. (U) Summary: After years of steady increases in remittances
sent by Mexican workers in the U.S. to their families in Mexico,
the current U.S. economic slowdown has caused a sudden drop in
such payments. The decline in remittances stems from the
concentration of Mexican workers in the construction sector and
other industries affected by U.S. economic problems. Here in
Northern Mexico, local government officials, bankers,
businessmen, academics and social workers all report that
numerous factors, including a dramatic shift in remittances from
Mexican nationals working in the U.S., are contributing to
economic dislocation in the region. However, our contacts do
not believe that declining job prospects in the U.S. will result
in reverse migration back to Mexico, but rather most workers
will stay in the U.S. in lesser paying jobs. End Summary.
DECLINE IN REMITTANCES ACROSS MEXICO
-------------- --------------
2. (SBU) According to a regional representative from the
central Bank of Mexico, remittances sent from Mexicans working
in the United States declined seven percent from the third
quarter of 2007 to the third quarter of 2008. This is the first
such annual decline recorded since the bank began collecting
this data in 1999, and represents a dramatic downturn from
record increases of 25 percent observed in 2006. The adverse
economic effects of this sudden change are substantial.
Remittances to Mexico in 2007 amounted to almost $24 billion,
roughly equivalent to the rate of direct foreign investment in
the same year. In comparison, Mexico garnered $38 billion from
oil exports and $13 billion from tourism in 2007.
3. (SBU) The Bank of Mexico conducts detailed demographic
surveys of workers who send remittances and the families that
receive them. The latest survey shows that two-thirds of
Mexicans working in the U.S. regularly send monies home, with
the primary recipients being parents (69 percent) followed by
spouses (12 percent). Over half of the workers earn $1000-$2000
monthly; another third earn over $2000. The amount sent home
monthly averages over $430 for recent arrivals (less than 5
years),but declines over time to $340 for long-term workers (11
years or more). Over two-thirds of workers sending remittances
have no high school education. Over half of the workers have
two to four dependents living with them in the U.S. The survey
showed that 86 percent of the money sent is used for basic
maintenance and consumption; six percent is used for education;
and only one half of one percent is used for community
improvements or small business development.
4. (SBU) Mexican nationals working in the United States
gravitate towards three sectors: hospitality and food services
(54 percent),construction (23 percent) and manufacturing (14
percent). The heaviest decline in employment over the past year
has been in the hard-hit construction industry. However, the
unemployment rate for Mexicans in the United States has only
inched up from five to seven percent, suggesting that they have
left the United States or moved to other jobs. The report from
the Bank of Mexico indicates that the decline in construction
employment tracks very closely with the drop in remittances.
CRISIS IMPACTS NORTHERN MEXICO
-------------- --------------
5. (SBU) Economic dependence on income from workers in the
United States varies across Mexico, with the rural southern and
central states being far more susceptible than the north to any
disruption in remittances. The most vulnerable states are
Michoacan (10.4 percent of GDP from remittances),Oaxaca (8.2
percent),Zacatecas (7.8 percent),Guerrero (7.6 percent) and
Hidalgo (7.2 percent). In the more industrialized areas of the
northern border region, the economic displacement of Mexicans
from rural to urban areas is a larger concern than the drop in
remittance income. The north-eastern state of Nuevo Lesn
receives less than one-half of one percent of its GDP from
remittances, but state officials report that social services are
increasingly stressed by migrants from the neighboring rural
MONTERREY 00000489 002 OF 003
states of Tamaulipas, Durango, and Zacatecas.
6. (U) Of the north-central states, Zacatecas has felt the
strongest economic impact. Millions of Zacatecans live and work
in the U.S., with large concentrations in Dallas, Oklahoma City,
Los Angeles, and Chicago; we understand that half the
native-born population of Zacatecans lives in the United States.
A representative from Zacatecas reports that the decline in
remittances is having a dramatic effect on the rural populations
in his state, reducing discretionary spending and forcing many
families to return to subsistence agriculture. As families cut
back on spending, service industries have suffered a
corresponding loss of income, sending ripple effects through the
local economy.
7. (U) Rural areas of Durango are also experiencing economic
dislocation. During a recent consular visit to the town of
Santiago Papasquiaro, the mayor complained of a 30 percent drop
in attendance at the town's annual harvest festival. He
related that in previous years, many migrant workers would
return to the area from the U.S. to attend the fair, and bring
their families along. This year, very few workers could afford
the trip, and those that did had less money to spend. The local
shops and restaurants were also suffering, as local families had
less disposable income.
8. (U) The decline in remittances has also affected the
Mexicans families ability to pay their bills. A contact in the
collection department of a large U.S. credit company reports
that delinquent payments are much higher because the families
receive their money to pay the credit card bills from
remittances.
9. (U) Cemex, a leading cement producer headquartered in
Monterrey, sponsors several philanthropic programs to aid
low-income families in Mexico. The Construmex program allows
Mexican workers in the U.S. to purchase cement and other
construction materials for their families back in Mexico to make
`self-help' improvements to their homes. During a recent
international conference on philanthropy in Monterrey, a Cemex
executive revealed that participation in this program had fallen
by 20-30 percent over the past year.
IMPACT ON IMMIGRATION AND TRAVEL TRENDS
-------------- --------------
10. (U) Applications for non-immigrant visas in 2008 are down
in every post in Mexico with the exception of Ciudad Juarez (the
increase in Ciudad Juarez is attributed to an anticipated surge
of visa renewals, echoing a 1998 surge of applications for the
then-new border crossing card). An analysis of visa trends from
Mexico, presented at the recent Mexico consular chiefs
conference in Monterrey, reveals that visa application levels
have historically tracked very closely with the state of the
American economy. Recent increases in application fees, coupled
with increases in Mexican passport fees have also contributed to
this decrease in visa demand, as the overall cost of applying
for visas becomes out-of-reach for many low-income Mexican
families. Concurrently, approval rates for non-immigrant visas
in Monterrey have increased inversely to the number of
applications, indicating that many economically marginal visa
applicants may now be `self-selecting out.'
11. (U) Despite scattered anecdotal reports to the contrary,
authorities in Mexico do not anticipate a surge in returning
workers. Many of the Mexican nationals in the U.S. who have
recently lost jobs due to the economic downturn have very little
economic incentive to return to their homes in Mexico, where job
conditions are often much worse. Instead, most are expected to
seek jobs in the U.S. further down the income scale, moving
from the construction and industrial sectors to agriculture or
food service. The rare exceptions to this trend are generally
recent immigrants from the middle class, who have found that the
job market in the U.S. was not as welcoming as in past years,
MONTERREY 00000489 003.2 OF 003
and who may still have economic opportunities in Mexico.
COMMENT
--------------
12. (U) Comment. The economic crisis in the United States
will continue to bring repercussions to Mexico in the form of
decreased remittances, tourism, and direct foreign investment.
While the industrialized northern regions of the country are
less susceptible to negative effects from a decrease in
remittances, the ripple effects from decreased foreign
investment and increased internal displacement will be strongly
felt in all urban areas. First-time visa applications and
immigration to the U.S. -- both legal and illegal -- will likely
continue to slow from recent historical highs, although it
appears unlikely that we will see any large-scale reverse
migration in the near term. End Comment.
WILLIAMSON