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Recent Developments in Labor Migration and Remittances to Mexico

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II. Remittances: Who sends them and why?III. Effect of Remittances to the United States and MexicoIV. Recent Developments in the Remittance MarketV. Conclusions and Policy ConsiderationsI. IntroductionII. Remittances: Who sends them and why?III. Effect of Remittances to the United States and MexicoIV. Recent Developments in the Remittance MarketV. Conclusions and Policy ConsiderationsRecent Developments in Labor Migration and Remittances to Mexico Angel Hossain Graduate School of International Relations and Pacific Studies Tara Aubin Editor Disclaimer: This paper is intended for discussion and should not be cited without author’s permission! If you would like to cite it, please email: [email protected] 1Recent Developments in Labor Migration and Remittances to Mexico I. Introduction II. Remittances: Who sends them and why? a. Classification of remittances b. Return migration c. Other factors affecting remittances d. Selecting remittance recipients III. Effect of Remittances to the United States and Mexico a. Contribution to rural economies b. Effect on social relations IV. Recent Developments in the Remittance Market a. Matricula consular card b. Capitalizing on the money transfer market c. Technological improvements to remittance methods d. Recruiting the un-banked V. Conclusions and Policy Considerations 2I. Introduction Since the passage of NAFTA, the stream of migration and interaction between the United States and Mexico has steadily increased. Mexican President Fox and US President Bush have recently engaged in a series of talks involving growing economic ties and immigration issues that affect both nations. The bilateral relationship is especially delicate since Mexico and the United States are separated by a unique border between a highly developed country and a developing one, which leads to a myriad of problems when dealing with labor migration. The US-Mexican border was largely left open until 1965; with no immigration quotas based on nationality as there were for most other countries.1 Beginning in WWII, the Mexican and United States governments implemented a "guest-worker" program known as the Bracero Program, under which Mexican men were transported into the United States to complete agricultural or field work.2 Young Mexican 1 Lucy A. Williams, Proper, Wealth and Inequality Through the Lens of Globalization: Lessons from the United States and Mexico, 34 Ind. L. Rev. 1243, 1246 (2001). (hereinafter Williams) 2 Id. at 1246 3nationals representing diverse rural villages would migrate to the United States either permanently or temporarily (with the intent to return to Mexico). The United States unilaterally terminated this program in 1964 due to increased mechanization of labor and US union opposition.3 Although the Bracero program had ended, it had established a foundation for migration patterns and social ties that later facilitated for Mexican nationals to immigrate.4 Throughout the long history of US-Mexican relations, migration has been the most consistent and controversial aspect of the bi-national relationship. Migrants often leave family and friends back home in Mexico and live and work in the United States. Although their type of work may be extremely diverse, one common theme among migrant workers in the United States is the proximity of their home country; and thus their desire to support their loved ones through remittances. Due to the increased political and economic interaction between the United States and Mexico, and due to the growing number of migrants currently working in the 3 Id.4 Id. 4United States, the impact of this displaced work force should be examined more carefully. The volume of migrants moving into the United States from Mexico corresponds with a large volume of remittances these migrants routinely sent back into the Mexican economy. This process presents enormous potential for US banks to offer financial services to migrants wanting to remit their monies. It also has the potential to improve parts of the Mexican economy; specifically, remittances can contribute to the prosperity of receiving villages. This paper will discuss 1) typical characteristics of migrants who remit money to Mexico, 2) the effect of those remittances on both the United States and Mexican economies, 3) recent schemes US banks have developed to earn a larger share of the money-transfer market and, 4) policy considerations to increase the overall wealth of both nations. II. Remittances: Who sends them and why? There are several profiles of migrants who make the decision to improve their lot in life by crossing the border into the United States. The typical immigrant is a young, unmarried man from a rural area of Mexico; often with a connection for a job opportunity in the United States. Recently, more women have migrated with the intention of either providing for their families via 5remittances, or someday reunifying their families in the United States. Regardless of the migrant’s social status, Mexican nationals residing in the United States remain tied to their home villages and cities. These ties are responsible for the multi-million dollar remittance market that US commercial banks and money-transfer institutions are eagerly trying to infiltrate. Interestingly, there is a culture to the Mexican border towns that encourages immigration to the United States; whether it is teenagers sneaking across for fun, or "commuters" legally crossing each day for work or shopping.5 Many Mexican agricultural workers who are now legal US residents reside for some part of the year in Mexico and another part in the United States. Their cyclical pattern of migration increases the social contacts of young men in Mexican villages and makes it easier and cheaper for their friends and relatives to cross the border with them.6 It is likely this pattern of migration will continue to increase as older immigrants become established in ethnic enclaves and facilitate the entrance of newer immigrants. 5 Heppel, 55 6 Id. at 60 6a. Classification of Remittances The International Monetary Fund separates remittances into three categories: 1) workers' remittances, from workers who have lived abroad for more than one year; 2) remittances sent by migrants who have lived abroad for less than one year; and 3) migrants’ transfers (the net worth of migrants who move from one country to another.)7 Although


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