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January 2017, Volume 23, Number 1

Canada, Mexico, Central America

Canada admitted 260,000 immigrants in 2014, equivalent to 0.7 percent of its population, and plans to accept 300,000 in 2016, including refugees. Canada has traditionally admitted immigrants rather than guest workers, but during the economic boom beginning in 2000, the government allowed employers to have easy access to guest workers.

The number of guest workers rose rapidly, so that by the end of 2014 there were 353,000 foreigners in Canada under the Temporary Foreign Worker and International Mobility programs. Stories of employers favoring guest workers over Canadians prompted the government in 2014 to tighten regulations and remind employers of their obligations to give priority to Canadians and to cap the share of low-skilled guest workers at 10 percent of all workers, with exceptions for some employers who could have up to 20 percent.

As a result of these changes, the number of jobs certified to be filled with guest workers fell from 13,000 in 2013 to 90,000 in 2015. However, the share of jobs certified in agriculture rose from 45,000 to 53,000 between 2013 and 2015.

In "Temporary Foreign Workers and Firms: Theory and Canadian Evidence" Brochu et al, find that employers prefer guest workers because, even at the same wage, foreigners work harder and for more hours than similar low-skilled Canadians and have lower rates of absenteeism.

Mexico. Mexico and China were the two countries that were attacked most often by Trump during the 2016 campaign. Mexico was accused of stealing good US jobs as US manufacturers moved south to take advantage of lower labor costs and of sending criminals and drugs to the US along with migrants. Most experts said that Trump's calls to build a wall on the Mexico-US border that was paid for by Mexico or Mexicans, and to deport the 11 million unauthorized foreigners in the US, were expensive, were unnecessary and unworkable.

The Mexican peso fell to 21 to $1 after Trump's election, and Mexican manufacturing may be threatened by Trump's pledge to renegotiate North American Free Trade Agreement (NAFTA). Mexico-US trade totaled $580 billion in 2014, and could be reduced by a NAFTA renegotiation.

Mexico, the fourth largest auto exporter after Germany, Japan and South Korea, is deeply embedded into the North American auto industry, and is developing an aerospace repair industry. Some 3.5 million cars and light trucks were produced in Mexico in 2016, employing 730,000 workers in auto assembly and supplier plants.

Since NAFTA began in 1994, Mexico's economy has expanded by 2.5 percent a year, but wages in Mexico have stagnated rather than increased significantly. NAFTA increased foreign investment and manufacturing employment in Mexico, reduced employment in Mexican agriculture, but did not transform Mexico as the East Asian miracle transformed Asian economies. Most blame the Mexican government for not investing in infrastructure and education, so that factories could justify wage increases.

The Mexican government is trying to reform Pemex, the monopoly oil company since 1938, which can now form partnerships with private firms to develop new wells and to modernize its infrastructure. Pemex's oil production is projected to fall from 2.2 million barrels a day in 2016 to 1.9 million barrels a day in 2017, the lowest daily output since 1980. Pemex's oil output peaked at 3.4 million barrels a day in 2006, when Pemex provided 36 percent of the government's revenues. PEMEX provided 20 percent of the government's revenues in 2015.

There were over 17,000 homicides in Mexico in the first 10 months of 2016, the most ever. Homicides peaked at over 2,100 in May 2011, and were 2,000 in September 2016. One reason is that the Mexican government arrested the leaders of several drug gangs, which led to fragmentation and inter-gang rivalry.

El Salvador has one of the world's highest murder rates, 103 homicides per 100,000 people in 2015, compared with five per 100,000 in the US. One reason is that the 40,000 members of Mara Salvatrucha (MS-13) street gang have a presence in almost all of the country's 262 municipalities. Their violence costs the country of 6.5 million an estimated $4 billion a year, a sixth of the country's $24 billion GDP.

MS-13 is a relatively small operation, with its 49 chapters or programs earning $600,000 a week or $15 per member, half of the minimum wage for farm workers. Sugar cane growers in La Paz reported paying $300,000 a month in bribes to gangs, and $100 a month to cane cutters.

MS-13 gang members extort small businesses for small sums, such as $1 a day from bus owners, and kill those who refuse to pay. One bus company that refuses to pay spends $30,000 a month on security. The leader of MS-13 is El Diablito or Borromeo Henriquez Solorzano, 38, who arrived in Los Angeles as a child, founded MS-13 there, and was deported in the mid-1990s. El Diablito directs MS-13 from a Salvadoran prison, from which he ordered a halt to gang killings in 2012.

The US Treasury prohibits members and supporters of MS-13 and four other criminal syndicates, the Zetas, the Yakuza, the Russian Brothers' Circle and the Italian Camorra from dealing with US banks (www.treasury.gov/press-center/press-releases/Pages/jl2552.aspx). Salvadoran police have stepped up efforts to root out and kill gang members, who are generally tattooed and unable to find regular jobs.

Cuba. President Obama on January 14, 2016 ended the 22-year US wet-foot, dry-foot policy that allowed Cubans who reach US land to qualify for refugee and later immigrant status. The Cuban Adjustment Act of 1966 presumed that all Cubans who reached the US were refugees. In 1995, the US agreed to return to Cuba those trying to reach the US who were intercepted at sea, but continued to give refugee status to Cubans who reached US land. Almost 55,000 Cubans settled in the US in 2016.

Obama's decision means that all Cubans who reach US land can be returned to Cuba. The Cuban government said it will repeal a law that denies entry to Cubans who have been abroad more than four years.

Brochu, Pierre, Till Gross, and Christopher Worswick. 2016. Temporary Foreign Workers and Firms: Theory and Canadian Evidence. https://ideas.repec.org/p/crm/wpaper/1628.html