Economy crimps flow of funds over border
Slinging fish tacos at a stall in Grand Central Market on Broadway in downtown Los Angeles was never Ana Sanchez’s idea of heaven. But the job pays enough so that she can wire money to her mother and daughter in Mexico, and last year she sent $1,500.
This year Sanchez, 44, reckons they’ll be lucky to receive half that. With her wages stagnant and the cost of living climbing, her family in Jalisco state will have to do without.
“If it gets bad I won’t be able to send any money anymore,” Sanchez, a Commerce resident, said Tuesday. “I’ve even thought about moving back to Mexico.”
Across the U.S., the growth of remittances heading south of the border is slowing. Money sent to Latin America last year grew at the slowest pace in at least seven years, according to a report, showing how the stumbling U.S. economy, as well as government crackdowns on illegal immigrants, is taking a toll.
Immigrant laborers, most of them in the U.S., sent $66.5 billion to Latin America in 2007, the Inter-American Development Bank in Washington said. That was a record and a 7% boost over 2006 -- but the smallest increase since the bank began tracking remittances in 2000, and less than half the pace of the last few years.
The deceleration was particularly evident in Mexico, far and away Latin America’s biggest recipient of remittances. Mexicans living outside the country sent an estimated $24 billion to family members in 2007, virtually almost unchanged from 2006.
In January, remittances to Mexico fell 5.9% from January 2007 -- the biggest year-over-year decline since Mexico’s central bank started keeping records in 1995. Just a few years ago remittances to Mexico were growing by more than 20% annually.
To Mexicans, money from the north is crucial. Remittances are Mexico’s second-largest source of foreign exchange, behind petroleum sales, and the $1,500 that Sanchez wired to her family last year was roughly equivalent to an annual salary at that country’s minimum wage of about $4.65 a day.
For immigrants like Sanchez, the financial squeeze stems from the rising cost of food, gasoline and other basic necessities. Others have taken a hit on the income side.
In the last year, the U.S. building trades, which by some estimates employ 1 in 5 Latino migrants, has been hammered by the sub-prime lending crisis and real estate downturn, forcing thousands of laborers out of work or into lower-paying jobs.
“The slowdown in the U.S. economy, particularly in the construction industry, is clearly part of the reason for the slowdown in remittances to Mexico,” said Donald Terry, an expert on remittances at the Inter-American Development Bank.
Terry also said workplace raids could be changing the financial behavior of immigrants already in the U.S., with many holding on to their money in case they were to lose their jobs and need to relocate.
“There is a lot of fear and uncertainty,” he said.
At Discoteca 2000, a music store in downtown L.A., manager Carlos Esquivel said he had been seeing that firsthand.
“A lot of people don’t have work now, and the little money they have they’re saving to see if it’s just better to go back to Mexico,” said Esquivel, who in his 19 years in the U.S. has sent $5,000 annually to his three children in Guadalajara.
Remittances are especially crucial for poor Latin American countries.
In Guyana, 2007 remittances equaled 43% of the national gross domestic product. In Haiti it was 35% and in Honduras it was 25%. Brazil, the hemisphere’s second-largest receiver of remittances, saw its 2007 flows drop 4% to $7.1 billion. But that was good news.
A booming domestic economy has encouraged more Brazilians to stay put mainly because their nation’s soaring currency, the real, has appreciated so strongly against the dollar, Terry said, and tens of thousands of immigrants are returning home.
“The dollars they’re earning in the U.S. aren’t nearly as valuable as they once were,” he said. “For those trying to put something aside for the future, it makes a lot less sense now” to remain in the U.S.
Dickerson reported from Mexico City and Hsu reported from Los Angeles.