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Mexicans in the U.S. sending fewer dollars home

Remittances peaked at $24 billion last year. A slowing US economy and tougher border enforcement is blamed.

By Staff writer of The Christian Science Monitor / June 20, 2008

Juana Ayala Pastor stands in front of a new church in Emiliano Zapata, Mexico, built with money sent by her son in Oregon and other men working in the US. Now, less cash is coming.

Sara Miller Llana

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Emiliano Zapata, Mexico

When the finishing touches were put on this coral-pink Roman Catholic church last year, residents beamed. Our Lady of Guadalupe was the first church built here – and it was only made possible by the toil of sons, husbands, and brothers in the US.

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But today, many suspect this will be the last new edifice of any kind in some time. The flow of cash sent from the US, which over the years has helped pave the main road, build a basketball court, and construct or renovate almost every home in this 500-person village in Michoacán, has suddenly become a trickle.

Since 2000, remittances nationally have quadrupled, hitting a record $24 billion last year. Money from Mexicans abroad is now second only to oil as a source of foreign revenue. But the tide is turning – and is felt most acutely in rural Mexico. Remittances dropped 2.37 percent in the first four months of this year, compared with the same period in 2007, according to Mexico's central bank.

Analysts blame a downturn in the US economy, especially in the construction industry, which employs more than 20 percent of Mexican migrants, and the tightening of US immigration rules – including jail time in border states and greater state and local enforcement.

Mexico isn't alone in the revenue loss.

Only half of Latin American immigrants in the US, two-thirds of whom are Mexican, are sending home money on a regular basis, compared with 73 percent two years ago, according to a survey this year by the Inter-American Development Bank.

Here in the village of Emiliano Zapata, Cristina Calderon Luis, whose husband went to Illinois three years ago, right after they married, says she's no longer able to purchase the sand, cement, and bricks she'd been stockpiling so they could build their own home one day. For the past several months, her husband has been out of a job. "He doesn't have anything to send," she says.

"About 2 million fewer Mexican adults are receiving remittances. That will obviously have a substantial impact on the lives of those households," says Donald Terry, general manager of the Multilateral Investment Fund at the Inter-American Development Bank. "There is a great deal of uncertainty, a great deal of fear for the future. When you are uncertain of where you are going to be, your inclination is to put some money aside."

Many countries in Latin America, with strengthening domestic markets and a more diversified global economy, are better prepared to handle the consequences of a US downturn today than they were in 2001, says Alfredo Coutino, a senior economist for Latin America at Moody's Economy.com. Mexico's economy is more vulnerable than others because of its close trading relationship with the US, but it is still expected to weather a US slowdown, he says, with gross domestic product growth (3.3 percent in 2007) forecast to drop only slightly for this year.

But Mexico has increasingly grown dependent on remittances, and the loss is already being widely felt, particularly in the agricultural heartland from where so many migrants hail.

Of all the states in Mexico, it is Michoacán that receives the most money from the US each year, according to Mexico's central bank. Entire towns have left in search of jobs in the US construction, agricultural, and service industries. And it is here that the decline in remittances has been most dramatic – starting even before the national decline, says Heliodoro Gil Corona, an economist at Michoacán's School of Economists. He says remittances have fallen by 8 percent statewide since 2005, representing more than $330 million lost to households across the state.

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