Mexicans working abroad sent less money home in ’08

The amount of money sent home by Mexican migrants fell in 2008 for the first time on record, part of a worldwide trend that could worsen as emigrants from developing countries lose jobs in the global financial crisis.

Remittances, Mexico’s second-largest source of foreign income after oil, plunged 3.6% to $25 billion in 2008 compared with $26 billion for the previous year, Mexico’s central bank said Tuesday.

The percentage drop is nearly twice what the government had expected for the year, and central bank official Jesus Cervantes said the decline probably would continue this year.

Experts blame a crackdown on illegal immigration, which has stemmed the flow of those heading north to seek work, as well as the U.S. recession, which has resulted in many Mexicans, especially construction workers, being laid off.

It was the first time remittances had fallen year-to-year since the bank started tracking the money 13 years ago.

Mexico is not alone: After several years of strong growth, remittance flows to developing countries around the world slowed in the third quarter of 2008. They are expected to drop even further this year in response to the global crisis, World Bank economist Dilip Ratha said.

Global remittances, which totaled an estimated $283 billion in 2008, are expected to drop 0.9% this year, Ratha said.

“Remittances are the single strongest poverty-reduction tool that many countries have,” said Robert Meins of the Inter-American Development Bank. “This could translate into a great deal of hardship for a lot of people, which I think is underappreciated.”

In Mexico, reduced remittances are combining with a slide in exports to slow the economy, which the central bank Tuesday predicted would contract 0.8% to 1.8% this year. Mexico sends 80% of its exports to the United States. The government has forecast zero growth.

“It’s definitely another sign that Mexico is receiving a shock from the U.S. recession through its trade ties to it, and we expect the economy to be in recession this year,” said Jimena Zuniga, an economist at Barclay’s Capital in New York.

Mexico receives the largest amount of remittances in Latin America and the third-largest in the world, after India and China. But in those countries, remittances have only slowed, not dropped, because those nations have many skilled professionals working abroad who haven’t been hit as hard, Ratha said.

The situation is also bleak in the former Soviet countries that depend on remittances from people working in Russia. Many of those workers are now returning home because of a lack of jobs.

Almost a quarter of Moscow’s 2-million-strong army of “guest workers” has left. Anelik, one of Russia’s largest money-transfer agents, reported a 30% decrease in remittances from Russia last fall compared with the same period in 2007.

In Moldova, Europe’s poorest country, remittances from the 2 million migrants working in Russia represent nearly 40% of its gross domestic product. Deputy Prime Minister Igor Dodon told the Interfax news agency that half a million labor migrants from Moldova would return before year’s end.

In many countries, about 20% of the money that migrants send back is invested in long-term projects such as small businesses or other local development. Meins, the remittance specialist, worries that may stop as the poor use the little money that arrives for daily needs.

Even so, in most countries, remittances aren’t falling as fast as foreign investment. Because of that, some countries are even considering trying to issue bonds directly to migrants, Ratha said, encouraging them to continue to invest back home and believing that they are less likely to pull out during a crisis.