Some foreboding as Mexico's remittances hit record $28.7 billion
What's going on in Mexico?
When I hear that remittances have hit an all-time record high, at $28.7 billion, all I can think is something bad is going on, obviously in their economy. Remittance rises are a sign of some kind of spike in illegal immigration. Because nobody goes to the states, illegally or otherwise, unless the risk outweighs the reward.
The thing is, Mexico is not the worst place to live in Latin America - it's actually one of the best. Here in the states, we may see much of Mexico's lowlife and think that's the standard, because border jumping is what lowlife do (and it actually goes both ways, our badguys head for the border, too). But Mexico itself, on an ordinary level, is quite a tolerable country, with quite normal people, and median income above the $7,000 mark, which is the normal threshhold that, when reached, discourages illegal immigration. When incomes in the home country go above $7,000, it no longer becomes worth it to sell oranges on the offramp in Orange County. When incomes go below that, selling the oranges becomes more attractive.
So something disturbing is happening in the Mexican economy, even as pundits dismiss the phenomenon as having something to do with President Trump and his border crackdowns. Color me skeptical on that. Emigrating is more complicated than that.
The booming U.S. economy as compared to the less-vibrant Mexican one, suggest far more emigration decisions on the Mexican side than any dragon-fire from President Trump.
More to the point, this remittance surge and the economic pain back home it implies, may explain why a Chavista-style populist, Andres Manuel Lopez Obrador, commonly known as AMLO, is rising in the Mexican polls as it prepares to hold presidential elections this year. People who have lost hope in their futures or who are newly impoverished or maybe kicked around by crises vote for guys like that. The rest head to El Norte.
Which could portend problems with Mexico somewhere around the block. It ought to give anyone the creeps to know that a Chavista populist is rising in Mexico. A bad Mexican economy (and it's probably not helped by uncertainty over NAFTA, so President Trump should get right on in settling where he wants that treaty to go) and a crazed Chavista leader, who will turn his nation into another Venezuela, isn't going to be a good thing on our border. Take a look at what the people outflow is in a place like Venezuela, something like 20% and you won't be encouraged.
The thing is, all by itself the remittance phenomenon, so praised by the some elements of the multilateral agencies as good for potential development if the money is invested, is not generally a good thing if it isn't, according to one IMF report. Remittance economies tend to underdevelop a country, by robbing it of indigenous value creation and of human capital. All they leave is just dead-weight money on the table, which first is used to support families as a sort of welfare lifeline, and then ends up as taxes in government coffers. Sometimes it drives the value of the local currency up and makes exports from that country uncompetitive in international markets, which also harms development.
In places such as Central America, the long remittance dependency has actually left them with population crises; not enough young people able to take care of the old, hard as that is to believe. El Salvador in particular has this problem. Just as embattled nations in extended wars eventually get around to using younger and younger soldiers, what we are seeing from Central America is younger and younger immigrants coming to the U.S. -- as unaccompanied minors, because the older ones are gone.
The other problem is that extended remittance dependency based on illegal immigration breaks up families - and leaves young boys raised without fathers. We all know how that looks in the U.S. inner cities. Guess what the MS-13 dynamic is.
In the U.S., the remittances that come of illegal immigration drive down U.S. wages, particularly of those on the lowest-skilled parts of the ladder, and deprives communities of infrastructure capital from taxes. As money flows out from local communities, it leaves them underinvested and run-down. Nobody can live two places at once, after all. Illegal immigrants live here but their money lives in Mexico.Mexico gets the development but not the people. Van Nuys gets the people but not the shiny new roofs seen on so many houses in Zacatecas. And the remittances that build them are often untaxed.
So it's not a good thing to hear that remittances are rising in Mexico, particularly since we have been told, time and again, that Mexican illegal immigration has been tapering off. The remittance rise suggests that trend may be reversing and that portends trouble of a kind from that country that we have not seen.