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Mexican Remittances Grow at Strong Pace, Fueled by Donald Trump

Migrant workers have done well in the U.S. recovery, and the threat of a clampdown on immigration is encouraging them to send more money back home.

On an overcast afternoon last week in Brooklyn’s Sunset Park, a sparse crowd gathered around a mariachi band and dancers celebrating Cinco de Mayo, the effective Mexican national holiday. Like most of the hundred or so revelers, Roberto and his wife, Adela, are undocumented immigrants whose presence has become a major issue in the U.S. presidential election campaign.

Mexicans account for more than half the 11.4 million illegal residents in the U.S., according to the Pew Research Center, a nonpartisan think tank in Washington. Last year they sent $24.8 billion back to their families in Mexico, a total that exceeded the country’s oil export revenues ($23.4 billion) for the first time.

That money has become a ripe target for Donald Trump. The presumptive Republican presidential nominee suggests that if elected, he would expropriate this money unless the Mexican government agreed to finance construction of the giant border wall he promises to build to stop the flow of illegal immigration into the U.S. “It’s an easy decision for Mexico,” Trump told the Washington Post last month. “Make a one-time payment of $5 to $10 billion to ensure that $24 billion continues to flow into their country year after year.”

That’s why these are both the best and worst of times for Adela, an employee at a Brooklyn laundry, and Roberto, who has been promoted to assistant manager of a Korean-owned dry cleaner in Manhattan after a dozen years there as a delivery man. They send about $500 a month to their families, hardscrabble farmers living amid the craggy buttes and cactus-spiked hills of the state of Puebla, south of Mexico City. “My parents are having a good old age, with no money concerns,” says Roberto, 41, who hasn’t visited his hometown of Piaxtla in 17 years because he fears getting caught crossing back into the U.S. “But if el señor Trump becomes president, maybe we won’t even get to stay here,” says Adela, 40, who rests her hopes for legal residency on the fact that their two teenage sons are U.S. citizens, born in New York.

Trump’s controversial stance subdued Cinco de Mayo turnouts this year. In previous years more than 50,000 celebrators regularly showed up at the city’s largest festival, in Flushing Meadows Park in Queens. Crowds were smaller this year, as the organizers decided not to hold any formal festivities there this time to avoid stoking anti-immigration sentiment.

Although the political climate has become more daunting for Mexican immigrants, their economic prospects have improved. They were able to boost their remittances by 4.75 percent in 2015 because of the steady upturn in the U.S. economy, which has notably benefited labor-intensive sectors like construction, agriculture, hospitality and urban services that employ large numbers of immigrants. Whereas the overall U.S. unemployment rate fell to 5.0 percent in March from 5.5 percent a year earlier, the rate among Latinos fell to 5.6 percent from 6.8 percent.

“The recovery in the U.S. economy has also created more and better-paid jobs for many Mexican migrants, and this is reflected in larger remittances,” says Alfredo Coutiño, Latin America economist at Moody’s Analytics in West Chester, Pennsylvania.

Remittances also deliver a bigger bang for the buck back home because the peso has fallen by almost 30 percent against the dollar over the past two years. That might be an extra incentive to send more money home. “With a low inflation rate in Mexico, a lot of real purchasing power is being created by every dollar that gets remitted,” says Alberto Ramos, New York–based senior economist for Latin America at Goldman Sachs Group. “And with the pressure in the U.S. to clamp down on illegal migrants and labor, some Mexican workers may be transferring more of their savings to Mexico.”

The higher flow of remittances couldn’t have come at a better time for Mexico. Global oil prices stand at less than half the level of two years ago, at about $45 a barrel, while the inefficient state monopoly Petróleos Mexicanos — which generates a third of government revenue — has seen its output drop to 2.1 million barrels a day from a peak of 3.4 million bpd in 2004. With less oil income available, Mexico has been forced to tighten public spending, cutting back on its flimsy social safety net.

That means remittances are having a bigger impact than ever. They help explain how Mexico’s retail sales increased by 5.1 percent in 2015, more than double the country’s gross domestic product growth rate of 2.3 percent. In long-neglected rural areas, remittances are pulling families out of poverty for the first time ever.

Mexican migrants continue to rely on money transfer companies like Western Union, MoneyGram International and DolEx Dollar Express, rather than banks. A decade ago, HSBC, Citigroup and Bank of America, among others, launched initiatives aimed at attracting business from immigrants and their families back home in Mexico. “For banks, the revenue per remittance transaction is too low compared to other financial activities,” says Manuel Orozco, director of the Migration, Remittances and Development Program at the Inter-American Dialogue, a Washington-based think tank. “But they were hoping to capture clients for savings, payroll and other financial activities.”

That strategy failed in most cases. By 2013, both HSBC and Citi largely exited the remittances market. “Banks in the U.S. are generally not equipped to serve this customer base,” says Mario Trujillo, chairman and CEO of DolEx, based in Arlington, Texas. “They have a huge misunderstanding of who our customers are and what services they need.”

In Mexico, only about 20 percent of the population has a bank account, and there are few branches in the rural areas that receive most remittances. In the U.S., bank branch hours are often too limited for immigrants who clock more than 60 hours a week at one or more jobs. That leaves the field open to money transfer companies, which charge $9 to $13 per remittance at their own branches or at outlets in bodegas in Mexican neighborhoods.

“It’s a lot to pay to send money home,” says Roberto, wrapping a Mexican flag more tightly around his shoulders as night fell over Sunset Park. “But at least it gets there.”

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