The welfare of strangers; remittances home from Latin Americans abroad have become big business—with a difference. Michael McCaughan explores the paradoxical results - Latin America

New Internationalist, Jan-Feb, 2004 by Michael McCaughan

DURING the past two decades Latin America's military juntas have been replaced by democratic regimes that have implemented the economic policies of the 'Washington Consensus'. From Tijuana to Tierra del Fuego governments have repealed labour laws, privatized communal lands and removed subsidies from domestic industries.

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The results have been disastrous. The 'lost decade' of the 1980s was followed by the 'black hole' of the 1990s, forcing millions of people to emigrate northwards in search of an income. In 2002, for the first time ever, more money flowed from relatively poor migrant workers in rich countries than the combined total of government aid, private bank lending and IMF/World Bank aid and assistance.

A parallel 'welfare state' has been created. Waiters, gardeners and grape pickers send home monthly remittances averaging about $200 per family. This small but steady trickle of dollars has turned into a deluge. Six million Latin American immigrants in the US alone are expected to send about $42 billion to their home countries in 2003, of which $14 billion will make its way to Mexico.

This exceeds the income from Mexico's two most profitable industries--tourism and oil. Unlike tourist revenues, which are concentrated in the hands of big business, or oil, which swells state coffers, remittances are distributed on a more egalitarian basis, paying the monthly food bill for millions of extended families. The remaining cash is further divided among communities, purchasing public works, sports facilities, community fiestas and religious services.

The paradox of development and migration is evident in the dusty town of Changuitiro, in Michoacan state. A newly paved road, financed by remittances, leads to a virtual ghost town where more than half the homes are closed up. Gustavo Aguilar, aged 32, describes how Changuirito's primary school housed 180 pupils in his day, but has just 18 pupils now. In the nearby community of Nuevo Morelos the primary school has shut its doors completely. The municipal district of Churintzio, Michoacan, has been struck off the national list of marginalized districts on account of the influx of remittances--even as the town drifts steadily toward economic meltdown.

Recent studies indicate that the departing migrants no longer fit the historical profile of uneducated rural inhabitants. Urban professionals are now leaving in large numbers; 80 per cent of Colombian and Peruvian youths express a desire to emigrate in search of employment.

Foreign investors have been nervously observing the shift toward centre-left government in Latin America. Money transfers now play a vital role in maintaining financial stability. In August 2001 the Banco do Brasil issued $300 million worth of five-year bonds, using anticipated future remittances from Brazil's one million expatriates living in Japan as collateral.

'Let's have a round of applause for our migrants!' exclaimed Mexican President Vicente Fox in November 2003, announcing a fresh push for a migration accord with the Bush Administration in the US. One of Fox's key pledges on the presidential campaign trail in 2000 was to secure a better deal for the estimated 25 million Mexicans living in the US, most of whom have no access to healthcare or labour protection.

However, the US Congress has summarily dismissed all efforts to pursue an amnesty for immigrants. Arnold Schwarzenegger, recently elected Governor of California, swiftly cancelled legislation permitting undocumented citizens to obtain driving licences. After three years of hard work President Fox has managed to secure an agreement to receive Peace Corps volunteers, established a 'hotline' to deal with urgent migration matters, and carried home some souvenir photos of a smiling George W Bush.

Halfway through his term of office, Fox has cut his wish-list simply to reducing the cost of sending money home. Three international money-transfer agencies dominate the market, sucking out an estimated four billion dollars for themselves. Western Union charges 15 per cent on transactions; Cubans pay an average 25 per cent to send their dollars back to the embargoed island.

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However, the agencies are no longer unchallenged. The community of Ayoquezco in Oaxaca has set up co-operative projects to reactivate the local economy. A group of women has established Mujeres Envasadoras de Nopal, exporting a beloved Mexican foodstuff (prickly pears) to the US. So far the company has sold 750 jars of Nopal through a fair-trade network--a modest beginning which has, nonetheless, empowered women who for decades were dependent on husbands living abroad. Construction work on a new Nopal factory was due to begin in December 2003--the women plan to increase earnings, create jobs and, possibly, even reverse the migration flow.

In another promising initiative, Raul Hinojosa and the Foundation for Productivity in the Countryside have launched a system that uses debit cards and the internet to bypass the money-transfer agencies. On 1 November 2003 the first transfer took place. An emigrant in California deposited money for a relative, who received it at a credit-union office in Santa Cruz Mixtepec, Zimatlan. There was no commission at the receiving end, while the cost in California was less than $10, regardless of the amount sent. The project remains on the starting blocks, awaiting the installation of several hundred internet cafes in towns and villages across Mexico.