BajaNomad

Less money going to Mexico as U.S. economy falters

elgatoloco - 10-1-2008 at 02:31 PM

http://www.latimes.com/news/nationworld/world/la-fg-mexmoney...

Less money going to Mexico as U.S. economy falters
Remittances that Mexicans living in the U.S. send home take a dive, and families south of the border are feeling the effects.
By Tracy Wilkinson
Los Angeles Times Staff Writer

1:32 PM PDT, October 1, 2008

MEXICO CITY — The money that Mexicans living in the U.S. send home, a lifeline for both the economy here and millions of families, has suffered its steepest decline on record, dragged down in large part by the American financial crisis.

The bad news, announced today by the Bank of Mexico, follows government assurances that the U.S. crisis would not have a severe effect on Mexico.

Remittances fell to $1.9 billion for August, a 12.2% drop from the same month last year, the bank said. "In the coming months, it can be anticipated that . . . family remittances will continue to show a loss in strength," the bank said.

Remittances account for the second-largest source of foreign income in Mexico, after oil exports, and have more than doubled in value in recent years, to nearly $24 billion in 2007. The money is used to pave roads, start businesses, furnish homes and help feed and clothe families.

But the trend began to reverse this year. Both the U.S. economic downturn, especially in the construction sector that employs many Mexican immigrants, and tightened controls along the U.S.-Mexican border have slowed the flow of money and people.

August's showing was the biggest fall in remittances since authorities began keeping records 12 years ago, the bank said.

Countless Mexican towns are feeling the pinch, with small mom-and-pop businesses failing and families struggling to make ends meet.

The central bank also calculated that unemployment is running considerably higher among Mexican immigrants working in the U.S. than among the general labor force. Unemployment among Mexican immigrants was about 4.5% in March of last year and has soared to nearly 7.5% now. The U.S. jobless rate for the general work force is 6.1%.

Mexican President Felipe Calderon said in a speech last month that his country is so free of dependence on the United States that financial disaster there will be but a glancing blow here. Finance Minister Agustin Carstens later sounded less sanguine. He told reporters in Washington this week that while Mexico is generally protected from U.S. fallout, the Mexican economy will be hurt by declines in remittances, manufactured exports and tourism.

Economic analyst Rogelio Ramírez de la O warned that the government will minimize the effect of the U.S. crisis at its own peril. Although it is true that Mexican banks are not teetering on the brink of collapse, more and more Mexicans are sinking deeper into debt, he said. And, he added, the government is spending as though there were no tomorrow.

"The government must first understand the reality and then communicate it clearly to Congress, to business leaders and to the public," Ramirez wrote in today's El Universal newspaper. "If the government does nothing, as it has so far, it will take this country down a dead-end road."

Woooosh - 10-1-2008 at 05:01 PM

I think some of it was the peso value at 10-1 or slightly less last month. The banks automatically convert dollars to pesos in those transactions and I think people that could just waited. Many peopol eseem to know when the rate will fluctuate in advnace- its changed almost 10% in the past few weeks alone.

thebajarunner - 10-1-2008 at 07:07 PM

Granted, some may be due to currency fluctuations, but I know of a number of guys, locally, that had lower level jobs and were remitting back home, several are out of work, and all are concerned.

At one of my companies just today one of the drivers stopped me in the street and told me (in Spanish) that he had three relatives in town, all out of work and hurting.

And, for Calderon to suggest that he is immune from U.S. woes....

Man is that a joke,
if our economy gets the sniffles, his will have a heart attack.
(and he knows it)

elgatoloco - 10-1-2008 at 07:56 PM

"Remittances account for the second-largest source of foreign income in Mexico, after oil exports............"

I read elsewhere the country's proven oil reserves will run out in 2016. Production has dwindled. They would have to change the constitution to allow foreign investment for upgrades to infrastructure.

No bueno.

Shark18 - 10-1-2008 at 08:19 PM

Quote:
Originally posted by thebajarunner
And, for Calderon to suggest that he is immune from U.S. woes....

Man is that a joke, if our economy gets the sniffles, his will have a heart attack.
(and he knows it)

Mexico exists in America's shadow. It has always been dependent on the US. But the Mexican machismo would never let them admit it. The US bailed Mexico out in the mid-1980's and again in 1994. It's about time for them to come knocking on the door with their sombrero in their hand.

Alex - 10-1-2008 at 08:24 PM

Quote:
Originally posted by Shark18
Quote:
Originally posted by thebajarunner
And, for Calderon to suggest that he is immune from U.S. woes....

Man is that a joke, if our economy gets the sniffles, his will have a heart attack.
(and he knows it)

Mexico exists in America's shadow. It has always been dependent on the US. But the Mexican machismo would never let them admit it. The US bailed Mexico out in the mid-1980's and again in 1994. It's about time for them to come knocking on the door with their sombrero in their hand.


You call 94s NAFTA a bailout? Gimme a break. More like a piece of mierda that you can thank for those undocumented workers many bajanomads love

Shark18 - 10-1-2008 at 09:29 PM

Quote:
Originally posted by Alex
[You call 94s NAFTA a bailout? Gimme a break. More like a piece of mierda that you can thank for those undocumented workers many bajanomads love


Wasn't talking about NAFTA. In 1994-1995, The Clinton administration put together a $50 billion loan to Mexico to stabilize the peso after it devalued about 50% in one week and all the capital was leaving the country. The peso devalued because Mexico then -- just as now -- was spending money it didn't have and ran up a huge deficit.

However, everytime Mexico has a financial crisis the undocumented head for the US like homing pigeons. We won't be able to build a border fence high enough for the next crisis.

LOSARIPES - 10-2-2008 at 02:32 AM

Generally, the "rescue" Mexico has been subject to has actually been opportunities for the US and IMF to put a leash on Mexico, conditioning its economic direction, spending, etc. Mexico struggled to get out of debt for many years. It paid its foreign debt and has now built federal reserves to the point it has shielded its economic from the US's financial crisis..... well, to some extent. Admittedly, that would never happen in a global economy but Mexico is in a much better position to deal with the US's financial woes now. The fed. reserve is something Mexico never enjoyed in the past. That is what Mexico needed to borrow to continue operating and keep its social spending -jobs-.
The sectors mostly affected by the US crisis have been reported as: Tourism; Remittances and Exports... three big ones. If Calderon is right, Mexico has saved enough to ride the storm and come out ok, providing the gringos get their act together.

805gregg - 10-2-2008 at 07:14 AM

Quote:
Originally posted by elgatoloco
"Remittances account for the second-largest source of foreign income in Mexico, after oil exports............"

after oil? second largest after drugs.