WASHINGTON -  

- As migration from,
and remittances to, Mexico have decreased as a result of the current
recession, the Mexican economy ominously worsens

- Migration, remittances, and the national economy should be considered
as integral components in the debate over whether Mexico deserves to be
classified as a "failed state," and what should be United States policy

The Mexican economy and many of its national institutional
structures may be on the brink of collapse. While drug war violence has
dominated the recent news about the possible irreversible status as a
society beyond remediation, the topic of immigration has been either
marginalized or used to further promote fears that the conflict may
spread to the United States. Drugs, national security, and
economic recession have replaced immigration reform on the United
States' policy agenda. However, the current financial crisis, and its
impact south of the border, is intricately linked to matters of
immigration, security, and Mexico's very cohesion.

Previous Mexican Economic Crises and their Impact on Migration
In the past, economic crises in Mexico have precipitated spikes in
immigration to the United States. In 1982, falling oil prices forced a
72 percent devaluation of the peso, resulting in a 30 percent increase
in Mexicans apprehended along the U.S. border, from 1 million to 1.3
million, in 1983 and 1984. In 1994, as the indigenous Zapatistas in the
southern Chiapas region welcomed the North American Free Trade
Agreement (NAFTA) with an uprising, the economic crisis resulting from
the peso's devaluation resulted in another 30 percent increase in
border apprehensions. Additional factors, both internal and external,
shaped Mexican migration to the United States in the 1990s. The Mexican
economy could not produce enough jobs to accommodate the country's
dramatic population growth (68 million in 1980 to 94 million in 1995).
Consequently, the preferred solution on both sides of the border was to
bolster the Mexican economy through NAFTA, which intended to limit the
population's incentive to immigrate illegally to the United States.
Increased border security and United States employment levels were
expected to further curb migration in the mid 1990s. However, the 1994
peso devaluation increased the relative value of dollars earned by
Mexicans in the United States, providing a major incentive for the
population to seek employment north of the border and send earnings
back home.

The Economic Recession's Impact on Mexico
The current global financial crisis appears to be having the opposite
effect on Mexican migration: poor economic conditions are motivating
Mexicans to remain at home. Mexico City's National Statistics,
Geography and Information Institute recently reported that, from August
2007 to August 2008, the illegal and legal outflow of migrants has
declined by over 50 percent, from 455,000 to 204,000. Additionally,
remittances - the funds sent from immigrants abroad to their families
at home - have decreased for the first time since 1995. The number of
Mexican households receiving money from relatives abroad, largely in
the United States, has fallen from 1.41 million in 2005 to 1.16 million
in 2008. Remittances themselves, second only to oil as Mexico's largest
source of foreign income, have decreased by 11.6 percent to $1.57
billion from January 2008 to January 2009, the state-run Banco de
México revealed on March 3. The number of remittance transactions
declined by 20 percent in the same time period.

Although this decrease is less than that which the Banco de México
forecasted, the financial crisis paints a bleak future for the Mexican
economy, whose expected negative growth of 0.8-1.8 percent would
represent the sharpest decline since that of 7 percent in 1995.
Independent economists are even less optimistic - United States
investment bank JPMorgan predicts that the Mexican economy will
contract by 4 percent in 2009. These decreases will have negative
consequences for a country whose development, as a result of economic
integration with the United States, has become dependent upon the legal
and illegal export of cheap labor and remittance seekers. In an article
published by Migration Information Source, Raúl Delgado-Wise and Luis
Eduardo Guarnizo present Mexico's cheap labor / export-led model of
remittance-dependent development as having "imposed unsustainable
economic, social, and political costs upon Mexican society," including
the exodus of its domestic labor force and the ensuing relentless
impoverishment of rural areas.

Even a mass repopulation would not avoid straining the Mexican
economy. The Colegio de la Frontera Norte (COLEF) recently reported a
24.5 percent increase in Mexicans returning home from the United States
in 2007. Whether or not such a trend is true for 2008 and 2009 is as of
yet unknown. Nonetheless, if the economic recession and lack of
employment opportunities in the U.S.compels Mexicans to further
repatriate, the country would become increasingly vulnerable. According
to London's Latin News Daily, "Mexico would be unable to cope with a
mass return of migrant workers. For one, unemployment figures would
rise at a much faster pace and any further social unrest on the back of
this could destabilise the government."

Harsh economic conditions on both sides of the border also promise
to leave the 11.8 million Mexicans, or 10 percent of the Mexican
population, living in the United States and their southern dependents
in desperate situations. In general, Hispanic unemployment in the
United States rose from 5.1 percent in 2007 to 8.0 percent in 2008.
Hispanic immigrants are heavily concentrated in the industries left
most vulnerable by current conditions, such as construction,
manufacturing, leisure and hospitality, and support and personal
services. Americans' increased concern with job availability during the
crisis further limits the economic livelihoods of migrants and their
families. The remittance flows of other Central American states with
large migrant populations in the United States, such as El Salvador,
Guatemala, and Honduras, are not expected to be as severely effected as
those of Mexico. Many of these immigrants are granted temporary
protected status under special arrangements with the United States,
making their countries less vulnerable than Mexico to northern
political, legal, and economic fluctuations. The fact that the United
States and Mexico constitute, according to the World Bank, the "largest
immigration corridor in the world" further illustrates the profound
effect the decrease in migration and remittances may have on both sides
of the border.

Implications for Mexico and the United States
Evidently, through migration, remittances, and NAFTA-induced trade
integration, the Mexican economy has become increasingly dependent upon
that of the United States, making the former extremely vulnerable to
the effects of the current financial crisis. The decrease in migration
flows and remittances is thus implicit in the current debate about
Mexico's descent into being a "failed state." A Mexican economic
collapse, spurred by a decrease in the migrants and remittances upon
which the country' s economy is reliant, would weaken the state's
capacity to finance counter-narcotics activity, increase pay-rolls to
prevent political and military officials from corruption related to
drug trafficking, recuperate the depressed economy, and keep their best
and brightest at home. These series of developments would have a
negative consequence for the United States economy and the Obama
administration, as well. Mexico is the United States' third largest
export market, and the cheap labor that Mexican immigrants provide,
although not nearly as coveted given the current recession, is an
important part of the national economy. Additionally, Mexico's
potential economic and military collapse deserves to be viewed as a
national security threat to the U.S., given the spread of drug-related
violence to border states such as Arizona, where authorities blame a
rise in home invasions and kidnappings on organized crime from south of
the border.

Proposals
According to the London-based Latin American Weekly Report,
Mexico's crises of drug trafficking, migration, and economic
integration with the United States are interrelated and require an
accordingly nuanced approach from the Obama administration. Former U.S.
Ambassador to Mexico Jeffrey Davidow argues that, for the past three
decades, Washington has limited its policy towards Mexico to
one-dimensional approaches: drugs and economic stability in the 1980s
and 1990s, followed by immigration under the Bush Administration. Most
recently, U.S. policy is at risk of becoming narrowly focused on the
$1.6 billion, three-year Merida Initiative aimed against Mexican
narcotics trafficking, which Congress approved in 2008. Such
perspectives present the themes of Mexican policy as mutually exclusive
and lead to disproportionate focus on one aspect, such as aid for
military counter-narcotics activities. Davidow asserts that the current
U.S.-Mexican policy should avoid focusing solely on security, which may
be difficult considering the fear of Mexico's debilitating conflict,
which is moving north into the United States, between drug cartels and
the military.

The ambassador proposes that both countries establish commissions to
evaluate NAFTA's achievements and shortcomings. Mexico, recently
replaced by China as the United States' second largest source of
foreign trade (the largest is Canada) has not benefited fully from
NAFTA. Cheap goods from the north have forced domestic products from
the market, inexpensive Mexican labor has been exploited by United
States employers, and large U.S. agroindustries have used economic
pressure to force Mexican farmers from their land. Moreover, a recent
study conducted by Arnulfo R. Gómez of the Universidad Iberoamericana
found that the majority of Mexican exports are now destined for more
sources than the United States and that the maquila program of cheap
labor plants along the U.S.-Mexican border has proven ineffective in
transferring technology or developing Mexican supply chains. Mexico's
share of the United States import market has fallen from 11.59 percent
in 2002 to 10.7 percent in 2008, further indicating the erosion of
economic links between the two countries and the Calderón
administration's need to reevaluate trade with its northern neighbor.

Whether or not NAFTA will be revisited and reassessed, as President
Obama promised in his campaign, economic development through migration
and remittances should be viewed as one means of bolstering the Mexican
state and civil society in the face of crisis. United States policy and
aid should not be limited to counter-narcotics activity but should also
focus on facilitating domestic development and foreign remittances as
progressive steps towards fostering security and economic recovery. The
Obama administration's indicated shift from the persecution of illegal
immigrants to the vigilant monitoring of their employers would enable
Mexican migrant laborers to continue sending remittances home while
simultaneously limiting their employment opportunities to legal
channels, thus making illegal immigration less viable. At the same
time, means to facilitate legal immigration and employment should be
encouraged. A progressive and multifaceted United States policy towards
Mexico would view immigrants at this stage not as criminals but rather
as agents of change in Mexico's pacification and development process.

This analysis was prepared by COHA Research Associate Edward W. Littlefield