U.S. housing slump hits home
MEXICO CITY — When California’s housing market was booming, Lucretia Diaz could feel the good vibrations 2,200 miles away in her rural hamlet in southern Mexico.
Her husband, Carlos Romero, an illegal immigrant living in Los Angeles, wired her $600 a month from his labors hanging drywall and pounding shingles. The remittances bought meat for tacos, sneakers for the kids and a few extras for the family’s home in tiny Juquila, Oaxaca.
No more. With U.S. home building in the dumps, Romero is working sporadically and sending little money. Diaz and her three young boys are eating rice and beans. She is watching every centavo.
So are economists who track this crucial southward flow of currency. They are worried by what they see.
Remittances are the financial lifeblood for millions of Mexican families and a crucial source of foreign exchange for their government. The $23 billion that maids, cooks, gardeners and others sent home last year — almost all from the U.S. — topped the amount that multinationals invested in Mexico. But fallout from the U.S. construction industry, which employs 1 in 5 Latino immigrants, is now rippling south of the border. Growth in remittances to Mexico has slowed to a trickle.
After increasing an average of just over 23% a year since 2000, remittances for the first two months of 2007 were just 5.5% ahead of the same period last year, according to Mexico’s central bank. The figure peaked in May at $2.3 billion and has drifted downward ever since.
Analysts say tougher border enforcement and workplace crackdowns by U.S. immigration authorities may be playing a role. Still, the remittance slowdown has moved virtually in lock step with the stumble in U.S. home building. Housing starts hit their 2006 peak in May before tumbling 50% by year-end.
Mexico isn’t the only country feeling the effect. Growth in money wired to Guatemala, El Salvador, the Dominican Republic and other Latin American nations has followed the housing market slowdown.
Romero, who has been in the U.S. for 10 years, hasn’t had steady construction work in six months, and the jobs he has found pay a lot less than they used to. A buddy just gave him a tip about a night position at a Los Angeles restaurant. He isn’t thrilled at the prospect of washing dishes or slinging hash on the graveyard shift. But Romero is running out of options.
“Even one day without work is bad. I’ve gone four days without work already this week,” the 38-year-old said anxiously by telephone from Los Angeles recently. “The situation is very bad for me and my family.”
It bodes ill for Mexico as well.
The deceleration in remittances is coming just as Mexico’s economy is weakening, oil revenue is falling and unemployment is on the rise. In the past, tough times pushed more migrants north and remittances increased, helping cushion downturns in the Mexican economy, said Gray Newman, chief Latin America economist for Morgan Stanley.
But with more U.S. agents patrolling the border and fewer construction jobs waiting on the other side, Newman said, Mexico might be in for a bumpier landing this time. He is projecting 3.3% economic growth for Mexico this year, down from 4.8% in 2006.
“In the past this was the one flow that acted as sort of a shock absorber,” Newman said of remittances. “This could be a double whammy.”
Nearly 3 million Latinos were employed in the U.S. housing industry in 2006, according to a study by the Washington-based Pew Hispanic Center. Three-quarters of them were foreign-born. Nearly 30% had been in the United States six years or fewer.
Within the construction business, lower-skilled immigrants are more prevalent in the residential sector, which has shed nearly 28,000 jobs since September, a 2.7% decline, according to the U.S. Bureau of Labor Statistics. Some experts believe that the slide is actually much worse because the activities of off-the-books day laborers aren’t fully reflected in official statistics.
Construction work typically pays better than farm and service jobs, a little over $20 an hour on average, according to government data. Many illegal immigrants toil for less. Still, the industry is considered a big step up from stoop labor in the fields.
Illinois bricklayer Francisco Godinez, a legal resident who arrived from Mexico in 1997, considers himself blessed to have a skilled trade. He landed so much work building subdivisions over the last few years that he wired nearly $25,000 to his family in Michoacan to build their own dream house south of the border.
His tools are mostly idle these days. The paint and flooring on the family’s new place will have to wait. Right now his wife and three children in Mexico need money for food and other essentials.
“I’m hoping to find work and send $200 or $300 in a week or so,” said Godinez, 38. “Things are really slow.”
Money-transfer companies are likewise feeling the pinch. Colorado-based Western Union reported that wire transactions to Mexico increased just 2% in the first quarter compared with the first three months of 2006. Minnesota-based MoneyGram doesn’t release volume figures. But spokeswoman Cathy Rebuffoni acknowledged “a slowdown in that market” largely because of sluggish U.S. construction activity.
Both firms also mentioned heightened tensions over illegal immigration as a factor cutting into sales. Analyst Gwenn Bezard, who follows the money-transfer industry, said he believed that tougher border enforcement was crimping the flow of new arrivals to the United States and that employment raids and deportations had spooked undocumented workers. He said some were avoiding places where immigrants congregate, such as major money-wiring chains.
“A lot of people are just staying home because they are afraid of being caught,” said Bezard, research director at Aite Group, a Boston-based financial services consulting firm. “The political climate has a lot to do with it.”
But in Los Angeles, Romero said his biggest fear was that his family was going without. He prays that the housing market will recover.
“I can do anything. Haul construction materials, put up walls,” he said. “At this point, I’ll take whatever construction job I can get.”
Times staff writers Cecilia Sanchez and Carlos Martinez contributed to this report.
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