– As migration from, and remittances to, Mexico have decreased as a result of the current recession, the Mexican economy ominously worsens
– Migration, remittances, and the national economy should be considered as integral components in the debate over whether Mexico deserves to be classified as a “failed state,” and what should be United States policy
The Mexican economy and many of its national institutional structures may be on the brink of collapse. While drug war violence has dominated the recent news about the possible irreversible status as a society beyond remediation, the topic of immigration has been either marginalized or used to further promote fears that the conflict may spread to the United States. Drugs, national security, and economic recession have replaced immigration reform on the United States’ policy agenda. However, the current financial crisis, and its impact south of the border, is intricately linked to matters of immigration, security, and Mexico’s very cohesion.
Previous Mexican Economic Crises and their Impact on Migration
In the past, economic crises in Mexico have precipitated spikes in immigration to the United States. In 1982, falling oil prices forced a 72 percent devaluation of the peso, resulting in a 30 percent increase in Mexicans apprehended along the U.S. border, from 1 million to 1.3 million, in 1983 and 1984. In 1994, as the indigenous Zapatistas in the southern Chiapas region welcomed the North American Free Trade Agreement (NAFTA) with an uprising, the economic crisis resulting from the peso’s devaluation resulted in another 30 percent increase in border apprehensions. Additional factors, both internal and external, shaped Mexican migration to the United States in the 1990s. The Mexican economy could not produce enough jobs to accommodate the country’s dramatic population growth (68 million in 1980 to 94 million in 1995). Consequently, the preferred solution on both sides of the border was to bolster the Mexican economy through NAFTA, which intended to limit the population’s incentive to immigrate illegally to the United States. Increased border security and United States employment levels were expected to further curb migration in the mid 1990s. However, the 1994 peso devaluation increased the relative value of dollars earned by Mexicans in the United States, providing a major incentive for the population to seek employment north of the border and send earnings back home.
The Economic Recession’s Impact on Mexico
The current global financial crisis appears to be having the opposite effect on Mexican migration: poor economic conditions are motivating Mexicans to remain at home. Mexico City’s National Statistics, Geography and Information Institute recently reported that, from August 2007 to August 2008, the illegal and legal outflow of migrants has declined by over 50 percent, from 455,000 to 204,000. Additionally, remittances – the funds sent from immigrants abroad to their families at home – have decreased for the first time since 1995. The number of Mexican households receiving money from relatives abroad, largely in the United States, has fallen from 1.41 million in 2005 to 1.16 million in 2008. Remittances themselves, second only to oil as Mexico’s largest source of foreign income, have decreased by 11.6 percent to $1.57 billion from January 2008 to January 2009, the state-run Banco de México revealed on March 3. The number of remittance transactions declined by 20 percent in the same time period.
Although this decrease is less than that which the Banco de México forecasted, the financial crisis paints a bleak future for the Mexican economy, whose expected negative growth of 0.8-1.8 percent would represent the sharpest decline since that of 7 percent in 1995. Independent economists are even less optimistic – United States investment bank JPMorgan predicts that the Mexican economy will contract by 4 percent in 2009. These decreases will have negative consequences for a country whose development, as a result of economic integration with the United States, has become dependent upon the legal and illegal export of cheap labor and remittance seekers. In an article published by Migration Information Source, Raúl Delgado-Wise and Luis Eduardo Guarnizo present Mexico’s cheap labor / export-led model of remittance-dependent development as having “imposed unsustainable economic, social, and political costs upon Mexican society,” including the exodus of its domestic labor force and the ensuing relentless impoverishment of rural areas.
Even a mass repopulation would not avoid straining the Mexican economy. The Colegio de la Frontera Norte (COLEF) recently reported a 24.5 percent increase in Mexicans returning home from the United States in 2007. Whether or not such a trend is true for 2008 and 2009 is as of yet unknown. Nonetheless, if the economic recession and lack of employment opportunities in the U.S.compels Mexicans to further repatriate, the country would become increasingly vulnerable. According to London’s Latin News Daily, “Mexico would be unable to cope with a mass return of migrant workers. For one, unemployment figures would rise at a much faster pace and any further social unrest on the back of this could destabilise the government.”
Harsh economic conditions on both sides of the border also promise to leave the 11.8 million Mexicans, or 10 percent of the Mexican population, living in the United States and their southern dependents in desperate situations. In general, Hispanic unemployment in the United States rose from 5.1 percent in 2007 to 8.0 percent in 2008. Hispanic immigrants are heavily concentrated in the industries left most vulnerable by current conditions, such as construction, manufacturing, leisure and hospitality, and support and personal services. Americans’ increased concern with job availability during the crisis further limits the economic livelihoods of migrants and their families. The remittance flows of other Central American states with large migrant populations in the United States, such as El Salvador, Guatemala, and Honduras, are not expected to be as severely effected as those of Mexico. Many of these immigrants are granted temporary protected status under special arrangements with the United States, making their countries less vulnerable than Mexico to northern political, legal, and economic fluctuations. The fact that the United States and Mexico constitute, according to the World Bank, the “largest immigration corridor in the world” further illustrates the profound effect the decrease in migration and remittances may have on both sides of the border.
Implications for Mexico and the United States
Evidently, through migration, remittances, and NAFTA-induced trade integration, the Mexican economy has become increasingly dependent upon that of the United States, making the former extremely vulnerable to the effects of the current financial crisis. The decrease in migration flows and remittances is thus implicit in the current debate about Mexico’s descent into being a “failed state.” A Mexican economic collapse, spurred by a decrease in the migrants and remittances upon which the country’ s economy is reliant, would weaken the state’s capacity to finance counter-narcotics activity, increase pay-rolls to prevent political and military officials from corruption related to drug trafficking, recuperate the depressed economy, and keep their best and brightest at home. These series of developments would have a negative consequence for the United States economy and the Obama administration, as well. Mexico is the United States’ third largest export market, and the cheap labor that Mexican immigrants provide, although not nearly as coveted given the current recession, is an important part of the national economy. Additionally, Mexico’s potential economic and military collapse deserves to be viewed as a national security threat to the U.S., given the spread of drug-related violence to border states such as Arizona, where authorities blame a rise in home invasions and kidnappings on organized crime from south of the border.
According to the London-based Latin American Weekly Report, Mexico’s crises of drug trafficking, migration, and economic integration with the United States are interrelated and require an accordingly nuanced approach from the Obama administration. Former U.S. Ambassador to Mexico Jeffrey Davidow argues that, for the past three decades, Washington has limited its policy towards Mexico to one-dimensional approaches: drugs and economic stability in the 1980s and 1990s, followed by immigration under the Bush Administration. Most recently, U.S. policy is at risk of becoming narrowly focused on the $1.6 billion, three-year Merida Initiative aimed against Mexican narcotics trafficking, which Congress approved in 2008. Such perspectives present the themes of Mexican policy as mutually exclusive and lead to disproportionate focus on one aspect, such as aid for military counter-narcotics activities. Davidow asserts that the current U.S.-Mexican policy should avoid focusing solely on security, which may be difficult considering the fear of Mexico’s debilitating conflict, which is moving north into the United States, between drug cartels and the military.
The ambassador proposes that both countries establish commissions to evaluate NAFTA’s achievements and shortcomings. Mexico, recently replaced by China as the United States’ second largest source of foreign trade (the largest is Canada) has not benefited fully from NAFTA. Cheap goods from the north have forced domestic products from the market, inexpensive Mexican labor has been exploited by United States employers, and large U.S. agroindustries have used economic pressure to force Mexican farmers from their land. Moreover, a recent study conducted by Arnulfo R. Gómez of the Universidad Iberoamericana found that the majority of Mexican exports are now destined for more sources than the United States and that the maquila program of cheap labor plants along the U.S.-Mexican border has proven ineffective in transferring technology or developing Mexican supply chains. Mexico’s share of the United States import market has fallen from 11.59 percent in 2002 to 10.7 percent in 2008, further indicating the erosion of economic links between the two countries and the Calderón administration’s need to reevaluate trade with its northern neighbor.
Whether or not NAFTA will be revisited and reassessed, as President Obama promised in his campaign, economic development through migration and remittances should be viewed as one means of bolstering the Mexican state and civil society in the face of crisis. United States policy and aid should not be limited to counter-narcotics activity but should also focus on facilitating domestic development and foreign remittances as progressive steps towards fostering security and economic recovery. The Obama administration’s indicated shift from the persecution of illegal immigrants to the vigilant monitoring of their employers would enable Mexican migrant laborers to continue sending remittances home while simultaneously limiting their employment opportunities to legal channels, thus making illegal immigration less viable. At the same time, means to facilitate legal immigration and employment should be encouraged. A progressive and multifaceted United States policy towards Mexico would view immigrants at this stage not as criminals but rather as agents of change in Mexico’s pacification and development process.
This analysis was prepared by COHA Research Associate Edward W. Littlefield
March 5th, 2009