All Things Considered

U.S. Woes Cut Cash Flow From Mexican Migrants

By Deborah Amos

Published November 3, 2009 2:58 PM

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In the mountains of central Mexico, the small town of Pahuatlan is hours away from the capital, but it's still closely tied to the global financial system.

Local villagers may not know the name Lehman Brothers — or about the company's collapse that sent the U.S. financial system reeling — but they do feel the effects of what happened in the U.S. economy, says Angel Vasquez, director of AMUCSS, a microfinancing bank project for rural Mexican villages.

One effect of the recession is seen clearly at the local microbank — part of a network of some 550 banks across the country serving rural communities — where remittances come in on the 15th of each month.

A remittance is money a worker makes and sends back home — and it's a cash flow into Mexico that slowed dramatically when the U.S. construction industry collapsed and Mexican workers in the U.S. were laid off last year.

If those workers had returned to Mexico, it would have created a big problem for the country. According to Vasquez, remittances from overseas workers are Mexico's second-largest source of income, after oil.

Reverse Cash Flow

So in the early months of the U.S. crisis, Mexicans sent funds north for the first time, to keep family members afloat. Vasquez says about 30 percent of the customers at the Pahuatlan branch borrowed money to bail out relatives — say, $500 that would allow them to survive for a few months.

The investment paid off. In time, many Mexican workers in the U.S. found other jobs. They often made less money, but it was enough to prevent waves of workers heading home.

Now, monthly remittances are about $100,000 a month, Vasquez says. But that is still down by about 30 percent over the past two years, the steepest drop ever.

Remittance Money At Work

A popular song sums up recent history in the area: Men from villages such as Pahuatlan cross the border illegally to join the American workforce. But the decline in money sent back home has slowed Mexico's recovery from a recession that is twice as bad as in the U.S.

In San Pablito, a mountain village of cinder-block homes and mostly unpaved streets in the central Mexican state of Puebla, it is as if there are no men — they've all gone to the U.S.

Here, the remittance money is at work. The microbank offers loans to start businesses that create jobs.

Successes have been small, but growing. One example is a handmade paper business. Carmela Santos and her extended family borrowed money to grow the company. But that's been hard given the current financial crisis, Santos says.

Still, 22-year-old Mario Cabrera has a job at the company, for now.

"They've been telling us that there's not much work in the United States," Cabrera says. "So, I decided to stay here and work in this business. I just dedicate myself to this."

Pull Of 'Paradise' Across The Border Still Strong

Many young Mexicans made the same decision to stay home, says Demetrios Papademetriou, of the Migration Policy Institute in Washington, D.C.

"Word travels very fast, so that's certainly one of the things that we have learned," he says.

In a three-month study published in September, the institute found that illegal migration from Mexico is down sharply, by about 1 million migrants since 2006, Papademetriou says.

"You have to expect you are going to be pushed back a number of times, but eventually you will come in. But if you made all of this effort and paid all of this money, and you come into the United States and then you don't have a job, it's not really worth it," he says.

But what happens when the U.S. recession fades and the Mexico recovery lags, as economists predict?

At the central bus station in Puebla, Mexico, migrant workers are already headed north, says the Rev. Jorge Galicia Amesqua. His Catholic church is a few blocks away, and he says he sees more and more migrants — from Central America and Mexico — heading to the border.

"Too many young people think that they have to go to the United States to find the paradise," he says. "The idea of the paradise is still in the mind of the people."

Deborah Amos' report comes courtesy of America Abroad, a monthly public radio international affairs program.

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MICHELE NORRIS, host:

From NPR News, this is ALL THINGS CONSIDERED. Im Michele Norris.

ROBERT SIEGEL, host:

And Im Robert Siegel.

Among its many impacts, the economic crisis has altered relationships across borders. And we're going to hear two stories now about the impact on relations between the U.S. and Mexico. In a few minutes, we'll visit the border town of Nogales, Arizona. But first to Mexico, where communities depend on money that workers send home from the U.S.

As NPR's Deborah Amos reports, that calculus has in some cases reversed: Mexicans are sending money to the U.S.

DEBORAH AMOS: This is Pahuatlan in the mountains of central Mexico, a small town with one main street. Pahuatlan is hours away from the capital, but it's still closely tied to the global financial system.

Mr. ANGEL VASQUEZ(ph) (Director, AMUCSS): At the beginning, they dont really know who is Lehman Brothers in the United States.

AMOS: Do they know now?

Mr. VASQUEZ: No, they dont. They dont really know who is Lehman Brothers, but they feel whats happening in United States.

AMOS: That's Angel Vasquez, director of AMUCSS, a micro-financing bank project for rural Mexican villages.

Mr. VASQUEZ: We're going through the micro-bank.

AMOS: This is where the remittances come in on the 15th of the month?

Mr. VASQUEZ: That's correct.

AMOS: A remittance is money a worker makes and sends back home; a money flow that slowed dramatically when the U.S. construction industry collapsed and Mexican workers were laid off last year.

You thought they'd all come home.

Mr. VASQUEZ: Yes, we thought about because in the news, they say, okay, the Mexican who lives in the United States come back. And we say, well, we're in a big problem.

AMOS: A very big problem. The Mexican economy depends on remittances, says Vasquez - after oil, the second largest source of income. So in the early months of the U.S. crisis, for the first time, Mexicans sent funds north to keep family members afloat. Vasquez says about 30 percent of the customers at the Pahuatlan branch borrowed to bail out relatives.

Mr. VASQUEZ: And they say, yes, because my husband lose the job in the United States. They send 500 American dollars. They support for three months with this money.

AMOS: And the investment paid off. In time, many Mexican workers found other jobs. They often made less money, but it was enough to prevent waves of workers heading home.

So about how much money comes through this bank every month?

Mr. VASQUEZ: Five hundred thousand American dollars.

AMOS: But still not as much as it was. Remittances are down by about 30 percent, the biggest drop ever.

(Soundbite of music)

Unidentified Woman: (Singing) Viva Mexico.

Unidentified People: Viva.

Unidentified Woman: (Singing) Viva America.

Unidentified People: Viva.

AMOS: This popular song sums up recent history here. Men from these villages cross the border illegally to join the American workforce. But the decline in money sent home has slowed Mexico's recovery from a recession that's twice as bad as in the U.S.

To see what that means in this central Mexican state, we drive up windy roads to a mountain village of cinderblock homes and mostly unpaved streets.

Mr. VASQUEZ: We are in San Pablito.

AMOS: In this community, there are no men.

Mr. VASQUEZ: Yes. The men, the United States...

(Soundbite of laughter)

Mr. VASQUEZ: Yes. Women are the workforce in the town.

AMOS: It's here that we see part of that remittance money at work. The micro-bank offers loans to start businesses that create jobs. Successes have been small but growing. For example, this handmade paper business, Carmela Santos(ph) and her extended family borrowed money to grow the company.

Ms. CARMELA SANTOS (Business Owner): (Through Translator) I asked for a loan from the micro-bank and I got it to invest in this work. But it's been a little hard with the crisis.

AMOS: But still, 22-year-old Mario Cabrera(ph) has a job here for now.

Mr. MARIO CABRERA: (Through Translator) Well, theyve been telling us that there's not much work in the United States, so I decided to stay here and work in this business. I just dedicate myself to this.

AMOS: A lot of young Mexicans made the same decision to stay home, says Demetrios Papademetriou, the executive director of the Migration Policy Institute in Washington.

Dr. DEMETRIOS PAPADEMETRIOU (Executive Director, Migration Policy Institute): Word travels very fast, so that's certainly one of the things that we've learned.

AMOS: In a three-month study published in September, the institute found that illegal migration from Mexico is sharply down by about one million migrants, says Papademetriou.

Dr. PAPADEMETRIOU: You have to expect that you're going to be pushed back a number of times, but eventually, you will come in. But if you made all of this effort and paid all of this money, and you come into the United States and then you don't have a job, it's not really worth it.

AMOS: But what happens when the U.S. recession fades and the Mexican recovery lags as economists predict?

Here at the central bus station in Puebla, Mexico, migrant workers are already headed north, says Father Jorge Galicia Amesqua(ph). His church is a few blocks away, and he says he sees more and more migrants from Central America and Mexico heading to the border.

Father JORGE GALICIA AMESQUA: Too many young people think that they have to go to the United States to find the paradise. The idea of the paradise is still in the mind of the people.

AMOS: Deborah Amos, NPR News.

SIEGEL: And that report comes courtesy of America Abroad, a monthly public radio program about international affairs. Transcript provided by NPR, Copyright National Public Radio.

Source: NPR

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