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July 2007, Volume 14, Number 3

Mexico: Remittances, Jobs, Economy

Mexican President Felipe Calderon, said the US Senate made a "grave error" on June 28, 2007 by rejecting immigration reform. He said: "The U.S. economy cannot keep going without migrant labor." The failure to enact immigration reform, he predicted, would "generate worse conditions and insecurity on both sides of the border."

Mexico received $23 billion in remittances in 2006, but the US housing slowdown may reduce remittances in 2007 if significant numbers of Mexican workers are laid off. According to the Pew Hispanic Center, some three million Hispanics, 75 percent foreign born, were employed in the US construction sector in 2006.

Mexico's statistical agency INEGI reported that an average of 577,000 Mexicans a year moved to the US between 2000 and 2005, while an average 495,000 Mexicans a year died in Mexico during these years. In 2006, INEGI estimated that there were 559,000 migrants to the US and 501,000 deaths in Mexico, that is, more people emigrated than died in Mexico. According to INEGI, 78 percent of the Mexicans going to the US between 2001 and 2005 entered illegally.

Jobs. Mexico had a total labor force of 42.2 million in September 2006, according to INEGI, including 13.6 million in the private sector social security system, IMSS. The number of formal sector jobs rose by 880,000 in 2006, as compared to the 577,000 increase of 2005 and 319,000 of 2004. A third of Mexican workers are in formal jobs, and many of the newly created formal jobs offer fixed-term contracts of one to two years. There were only 14 million permanent jobs registered with IMSS in 2006, meaning that over half of Mexicans are in the informal sector. The real wages of IMSS-covered workers have been rising less than two percent a year.

The sector with the most IMSS-covered jobs is professional services, 1.5 million in 2006; followed by construction, one million; and three sectors each with about 500,000 workers--electronics and electrical machinery, traders in food and beverages, and food production. About 17 percent of IMSS jobs are in Mexico City, followed by eight percent each in Jalisco and the state of Mexico.

Economy. The Mexican government announced plans in June 2007 to impose new taxes, close corporate loopholes and crack down on the underground economy to collect more revenue. The government estimates that half of the taxes owed are not collected.

In 2006, oil revenue provided more than 40 percent of federal spending. Oil production has begun to slide, and the government needs to find alternative sources of revenue. There is an often-evaded 15 percent value-added tax, but it does not apply to food and medicine.

Mexico's non-oil tax revenue is equivalent to about 11 percent of GDP (including the tax on oil, all taxes are 18 percent of Mexican GDP, compared to 25 percent in the US). The goal is to raise non-oil tax revenue to 20 percent of GDP by 2017, primarily by imposing a 19 percent minimum tax on business. The plan also proposes giving states increased authority to collect taxes, and it calls for increased efficiency and transparency in public spending.

Mexico's auto industry produced about 2.5 million light vehicles in 2006 and exported 1.5 million, over 80 percent to the US. Mexico has been exporting over a million light vehicles a year since 1996. GM, Ford and Chrysler account for about 60 percent of Mexican auto exports.

Vienna Convention. The 1963 Vienna Convention on Consular Relations requires local authorities to inform foreign nationals being held on criminal charges of the right to consult with their country's diplomats. There are 50 Mexican citizens on death row in the US, and the World Court ruled in 2004 that the Vienna Convention was violated for Mexicans charged and tried without the assistance of Mexican diplomats.

After the World Court ruling, the US government asked state governments to reconsider the convictions and sentences of foreign nationals on death row. Texas refused to reconsider a death sentence for Jos‚ E. Medell¡n, whose case, Medell¡n v. Texas (No. 06-984) will be heard by the US Supreme Court in 2007-08.

Central Americans. About 200 Central American immigrants were hidden inside a compartment of a tractor-trailer when it collapsed under the weight of tons of bananas, killing six. The migrants had paid between $5,000 and $7,000 to be smuggled from Central America, through Mexico to the US. The survivors will be deported.

It is a criminal offense to enter Mexico illegally. A 1974 law prescribes two to five years in prison for violations. About 240,000 foreigners, mostly from Guatemala, Honduras and El Salvador, were apprehended in Mexico in 2006.

Marla Dickerson and Carlos Martinez, "Mexico planning to raise its tax receipts," Los Angeles Times, June 21, 2007. "Bananas crush floor of rig, killing 6 immigrants in Mexico," Associated Press, June 5, 2007.