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July 2005, Volume 12, Number 3

Mexico: Legalization, Brazilians, Economy

Mexican President Fox continues to campaign to improve the rights of Mexicans in the US, but his efforts sometimes boomerang. In May 2005, while speaking to visiting Texas business leaders, Fox said that: "There is no doubt that Mexican men and women, full of dignity, drive and a capacity for work, are doing the jobs that not even blacks want to do there, in the United States."

Fox retracted his comments, but analysts were quick to turn the mirror on Mexican society, where discrimination against darker skinned residents such as the 10 million Indians is common. In one survey, 40 percent of Mexicans said they do not want to live near Indians, but 80 percent agreed that more should be done to reduce discrimination and poverty.

Brazilians. Mexico removed visa requirements for Brazilians and, with smugglers offering to take Brazilians to Boston via Mexico for $10,000, thousands of Brazilians are being apprehended on the Mexico-US border- some 2,000 a month. Many of the migrants are from Governador Valadares, a city of 250,000 in the inland state of Minas Gerais, which has sent an estimated 40,000 migrants to the US.

The migrants are often young and educated people who could find jobs in Brazil, but are attracted by higher-wage US jobs and able to migrate with the help of "travel agencies" that collect the fee after arrival in the US. There are 1.5 to 3 million Brazilians abroad, most in the US. Remittances in 2004 were estimated at $6 billion, equivalent to earnings from soybean exports.

Brazil, a country of 180 million, has been growing fast, so the migration wave or hump is unexpected. Part of the explanation for the migration fever may lie in the fact that 40 million people watch a daily soap opera called "America," which follows a young woman's efforts to get to the United States through Mexico and to adjust to life in Florida.

Economy. The Mexican central bank reported that remittances doubled between 2000 and 2004 to $16.6 billion, and could rise to $20 billion in 2005. Remittances appear to have increased much faster than the number of Mexican-born US residents.

Mexican researchers say that household surveys indicate that people receive only about 40 percent of the remittances reported by the Mexican central bank, suggesting that the $7.7 billion remittance estimate of the US Bureau of Economic Analysis for 2004 is more accurate. Rapidly rising remittances could reflect more migrants transferring funds via banks and other official channels, more business transactions between individuals, transfers from the US to Mexico by wealthy people, or money laundering. Some 11 million Mexicans are abroad, with 98 percent in the US.

According to the World Bank, about 20 percent of Mexicans lived in extremely poor households in 2002, and 52 percent were moderately poor. Mexico spends $3 billion a year on cash grants of up to $162 a month for poor households who keep their children in school and get health check ups under the Oportunidades program. In 2003, a third program was added to give $300 savings accounts to older youths who stay in high school. The program began in 1997 and was expanded by President Vicente Fox from rural to urban areas, so that with 25 million poor residents received some benefits in 2004.

The goal of these cash payments for education and health is to break the cycle of poverty. Studies suggest that, because of the programs, there are more visits to clinics in rural areas, more family planning and an increase in children's food consumption. School teachers say that families think twice about pulling children out of school because they know that if they do, they will lose some of their cash grant.

The number of permanent private-sector formal jobs in Mexico grew by one million between 2000 and 2004, from 13.5 to 14.5 million, while the labor force expanded by a million a year. Emigration to the US is a safety valve for up to 500,000 Mexicans a year. Other Mexicans go into the informal economy- the number of street vendors rose from a million to 1.6 million between 2000 and 2003.

Latin American countries have some of the world's most unequal income distributions, and it slows economic growth. This inequality is often traced to an abundance of natural resources and large indigenous population, so that economies relied on raw materials and cheap manual labor to exploit them in societies with low government taxation, few benefits such as good schools, and monopolies that stifled entrepreneurs. Economic advancement is more often achieved through personal relationships than merit, and family members tend to look out for each other.

In 1980, Mexico's economy was nearly four times the size of South Korea's. However, in 2005, South Korea had the world's eleventh largest economy, and Mexico the twelfth largest. About 26 percent of Koreans age 25 to 34 have a college degree, compared to five percent of Mexicans.

Maquiladoras, the border-area factories that import components, assemble them into TVs and other products, and re-export them, employed 1.1 million workers at the end of 2004, a third of Mexico's manufacturing workers. Maquiladora employment peaked at 1.3 million in 2000, and is not expected to return to that level until 2006.

Do maquiladora jobs keep Mexicans in Mexico or act as a bridge to the US? Traditionally, the argument was that maquiladoras acted as a fence, attracting young women who had just completed schooling and were in their first jobs. Instead of migrating further to the US, researchers found that most of the young women married and started families when they left their factory jobs. However, new research suggests that maquiladoras that draw Mexicans to the border may also serve as bridges to the US. The percentage of young women workers in maquiladoras has fallen, and interviews with maquiladora workers suggest that at least some intend to migrate to the US.

The effects of Nafta are clearly visible in border-area maquiladoras, and studies of economic development in Mexico since Nafta went into effect suggest that more highly skilled workers employed in industries that benefit from trade have benefited most, such as engineers and technical workers employed in auto and other maquiladoras. Southern Mexican states and those dominated by rain-fed agriculture have not grown as fast, and as a result inequalities between Mexicans by level of education and between states have increased.

A dispute at Rubie's Costume Company, a maquiladora that made Barbie doll gowns 60 miles north of Mexico City, highlights frequent union conflicts in the assembly plants. The workers in April 2005 voted for an independent union, leading to conflicts with the existing union affiliated with the Confederation of Mexican Workers and the Institutional Revolutionary Party, or PRI. Rubie's signed a contract with the new independent union, but the national labor board rejected it, saying the workers already had a contract with a CMW union.

Pemex, with $70 billion in annual revenue and 142,000 employees pumping 3.4 million barrels of oil a day, is the largest company in Latin America. However, its proven reserves are dropping, and President Fox wants to allow foreign investment in Mexican oil and gas to create efficiencies that would increase production and reduce prices, which sometimes exceed US prices for gasoline. Opponents say privatization would lead to more corruption, pointing to Carlos Slim, who bought Mexico's former state telephone monopoly and became the world's third-richest man ($24 billion). Mexicans now pay among the world's highest prices for phone service.

Gangs. The Mara Salvatrucha street gang, also known as MS-13, has up to 50,000 members operating in El Salvador and the United States. MS-13 is increasingly involved in human smuggling. In April 2005, Mexico and the US announced a joint effort to target MS-13 operations that move migrants through Mexico to the US. According to one migrant, gang members "own the trains" that run north through Mexico.

The presidents of four Central American nations appealed for international economic aid in April 2005 to help them address the social conditions that contribute to the growth of gangs. Mexico said that more of its youth are joining MS-13, a result that many attribute to disintegrating families caused by migration.

Mexico reported more Central Americans crossing its southern border, with most headed via Mexico to the US. A culture of migration is developing in some areas of Central America, reflecting bleak economic prospects, gang violence, and the growing network of ties to family members settled in the US. In May 2005, Mexico was reportedly returning 700 Central Americans a day at Tecun Uman, Guatemala; the US returns about 3,000 Mexicans a day.

Politics. Mexico City mayor Andres Manuel Lopez Obrador, the front runner in most polls for president in 2006, was stripped of his immunity in April 2005 and faced jail for disobeying a judge's order to stop work on an access road to a hospital in 2001. Lopez Obrador complained that the prosecution showed the face of "old Mexico." President Vicente Fox countered that the prosecution showed "new Mexico," where no one is above the law. Fox later reversed course, fired his attorney general, and said that Lopez Obrador was free to run for president in 2006.

David Luhnow and John Lyons, "In Latin America, Rich-Poor Chasm Stifles Growth," Wall Street Journal, July 18, 2005. Larry Rohter, "Brazilians Streaming Into U.S. Through Mexican Border," New York Times, June 30, 2005. Brendan M. Case, "Mexico figures doubted," Dallas Morning News, June 16, 2005. Ginger Thompson, "Uneasily, a Latin Land Looks at Its Own Complexion," New York Times, May 19, 2005. Faux, Jeff. 2003. How NAFTA Failed Mexico; Immigration is not a development policy. American Prospect. July-August, 2003. P35.