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MEXICO: Remittances from US

An important aspect of US-Mexico relations is that the Mexican economy is heavily dependent on remittances from the US, much from illegal immigrants. Remittances of money from the US to Mexico reached a new record of $2.74bn in the first quarter of 2003, revealing a flow of money home from Mexican migrants much higher than previously known. The increase in money transfers shows that the impact of migrant labor on the Mexican economy is even greater than had been thought. Remittances are now approaching 2 per cent of gross domestic product, second only to oil exports (about $4.9bn) and the maquiladora - the assembly-for-export sector - profits ($4.57bn) as a source of foreign currency. Oil, maquiladoras, remittances indicate an almost total dependence on the US. Many migrants come from agricultural areas in central Mexico, which have suffered a very slow economy in recent years. Banco de Mexico officials said that reductions in the cost for remittances may have helped to expand the market, as several of the largest US banks have launched aggressive pushes to gain remittance business in the last year. Such banks think they could gain a foothold among Hispanics - now the largest US minority. Mexican partner banks, meanwhile, hope that remittances will enable them to open branches in rural areas that are currently almost unbanked. Price competition has intensified in recent weeks, with Citigroup of the US announcing that it would cut the cost of each remittance to Banamex, its Mexican banking subsidiary, to a flat $5 fee. Traditionally, migrants have had to pay commissions of more than 10 per cent to send money. I do not know if the flat $5 fee will become general. Certainly the old fees were too high. Many poor countries receive remittances from family members in wealthy countries, but Mexico certainly tops the list. Often this indicates divided families, with the husband or son coming to the US while the family stays in Mexico.

Ronald Hilton - 5/20/03