VZCZCXRO8222
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #2042/01 1091714
ZNR UUUUU ZZH
R 191714Z APR 06
FM AMEMBASSY MEXICO
TO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHC/SECSTATE WASHDC 0334
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 MEXICO 002042 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD, AND EB/EPPD 
STATE PASS USAID FOR LAC:MARK CARRATO 
TREASURY FOR IA MEXICO DESK: JASPER HOEK 
COMMERCE FOR ITA/MAC/NAFTA: ANDREW RUDMAN 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN ETRD SMIG MX
SUBJECT: REMITTANCES AND MIGRATION PART I: A VIEW FROM 
RURAL MICHOACAN 
 
 
Sensitive but unclassified, entire text. 
 
This is the first in a series of four cables examining the 
effect of U.S. migration and remittances on the economy of 
rural Mexico. 
 
¶1. (SBU) Summary.  Immigration to the U.S. and the subsequent 
transfer of wealth through remittances is having a major 
social and economic impact in rural Mexico, as financial 
transfers are the primary source of income in many areas. 
While emigration has been common since the 1970's, the rate 
has dramatically increased in recent years due to a growing 
agricultural crisis and significantly higher wage rates in 
the U.S.  With remittance income so important to struggling 
rural communities, migration is implicitly, if not 
officially, encouraged by local leaders.  The amount of money 
sent back to Mexico grew by 17% in 2005 to 20 billion dollars 
(according to estimates by the Bank of Mexico), and federal, 
state, and local governments have instituted numerous 
programs to capitalize on this boom.  However, rather than 
being used for long-term investment, these transfers are more 
often used for basic consumption or to supplement inadequate 
entitlement programs.  While a critical source of revenue, 
remittances are unlikely to spur significant economic 
development in rural areas without corresponding social 
reforms designed to create an environment more conductive to 
entrepreneurship and investment.  End summary. 
 
MIGRATION DRIVERS 
----------------- 
 
¶2. (SBU) Many of the reasons for the record level of 
migration can be seen in rural Michoacan, an agricultural 
state known as "the garden of Mexico."  The economy of 
Venustiano Carranza, a community of approximately 50,000 
residents, has traditionally been based on tomato and onion 
farming.  Eight members of the city council, all born and 
raised there and considered pillars of the community, 
discussed current migration issues from a local perspective. 
The city council members explained to Econoff that the rate 
of emigration was greatly accelerated in the late 1990's when 
tomato and onion prices dropped dramatically, creating a 
severe economic depression and eliminating most employment 
opportunities for younger workers.  According to Ricardo 
Garcia, president of the local farming cooperative, this dire 
situation has continued with only 30% of arable land 
presently being farmed due to low prices and a lack of 
irrigation.  Jesus Davila, the city accountant, provided 
Econoff illustrations of the economic malaise - municipal tax 
revenue has fallen by 25% since 2000, while the local rate of 
unemployment has risen by 35%.  These developments have 
affected almost every facet of community life, limiting 
educational and advancement opportunities.  While all of the 
City Council members extolled the value of education, the 
region's only post-secondary school was closed in 2003 due to 
low enrollment. 
 
THE SOCIAL IMPACT OF MIGRATION 
------------------------------ 
 
¶3. (SBU) All of the leaders of Venustiano Carranza agreed 
that migration to the U.S. and the resulting economic 
transfers were necessary to ensure the survival of the town. 
Dr. Sergio Gudino, Council Secretary, admitted to Econoff 
that emigration to the U.S. is seen as an honor and an 
obligation by most citizens.  This attitude is encouraged by 
civic leaders; Javier Mendez, another council member, stated 
that he had two sons working in the U.S., and another was 
about to leave.  Mendez also claimed that 80-85% of families 
in the town had at least one migrant, and that approximately 
50-60% of the total city population resided in one of two 
homogeneous communities in California - Winter Garden and 
Oxnard.  Indeed, the streets of Venustiano Carranza were 
inhabited almost exclusively by the very young or the very 
old. 
 
¶4. (SBU) This large-scale migration has also resulted in 
powerful migrant associations in the U.S. which often exert 
significant influence in local policy making, even from their 
remote location.  The city council of Venustiano Carranza 
consults with association representatives in California after 
each council meeting, as well as before all important 
decisions.  The mayor of Cojumatlan, a small town located on 
Lake Chapala about twenty kilometers to the northwest, has 
 
MEXICO 00002042  002 OF 003 
 
 
found it necessary to make three trips per year to the U.S. 
in order to brief their relevant associations regarding 
community projects and issues.  This influence, however, 
appears to encourage greater transparency and accountability 
on the part of local leaders, and was at least officially 
welcomed by the representatives of Venustiano Carranza.  On 
the street, the involvement of emigre federations appeared to 
be quite popular with residents of the town, with several 
shoppers conveying their support for this phenomenon to 
Econoff. 
 
¶5. (SBU) Most of the city council members expressed to 
Econoff that the majority of migrants plan to return, 
although anecdotal evidence seems to suggest this does not 
often occur.  Javier Martinez, a council member, explained 
that normally the head of the household or the eldest son 
will migrate alone at first, leaving the rest of his family 
in Venustiano Carranza, until established in the U.S. 
Various City Council members mentioned that as time has 
progressed there are an increasing number of whole families 
who have now relocated.  However, while the eventual return 
of many of these families may be dubious, the migrants' 
financial commitment to their hometowns appear to remain 
high, perhaps due to typically strong remaining family ties. 
As evidence of this commitment, city council representatives 
pointed out the festival of the patron saint (which occurs in 
June each year), during which the city population nearly 
doubles due to temporary return of the Diaspora. 
 
THE ECONOMIC IMPACT OF MIGRATION 
-------------------------------- 
 
¶6. (SBU) One of the fundamental questions posed by 
remittances is whether this income allows poor recipients 
greater economic, educational, and social advancement 
opportunities.  Today, the population of Venustiano Carranza 
is almost completely dependent upon financial transfers from 
the U.S. (estimated to be 60-70% of the total economic 
activity of the city by council members), which serve in many 
cases as a substitute for lost agricultural profits.  As a 
result, most remittance income seems to be utilized primarily 
for basic consumption.  As many economists estimate that each 
dollar sent back to Mexico actually creates wealth by a 
factor of 1.8, the real life impact of remittances may even 
be greater.  Practical examples of this impact were evident 
during a visit to the local market.  Maria Esquivel, a 
life-long resident of Venustiano Carranza, told Econoff that 
the meat she was buying was paid for by wire transfers she 
receives from her husband in the U.S.  Juanita Ramirez, 
another resident, explained that while she earns a small 
income working in her parents' grocery store, the money sent 
by her husband enabled her to rebuild her home.  Maria Perez 
said that although she receives a small widow's pension, 
remittance income from her son is necessary for her to 
survive.  Although several examples of family businesses 
being funded by remittances were provided by city council 
members, they tended to be small grocery stores not likely to 
produce significant employment opportunities or tax revenue. 
 
¶7. (SBU) A more promising route to longer-term economic 
development is government initiatives such as the 
"Three-for-One" program created by the Fox administration in 
¶2002.  Under this program, each dollar donated by migrant 
groups in the U.S. to be used for local infrastructure 
improvements is matched by federal, state, and municipal 
governments.  Since proposals are submitted and supervised by 
migrant associations in conjunction with municipal 
authorities (although approved by a standing committee in 
Mexico City), there may be a potentially higher level of 
communication, transparency, and accountability concerning 
development projects than in the past, not to mention a 
higher level of funding.  "Three-for-One" has already made a 
large impact in Venustiano Carranza; the city council 
described several recent projects, including the renovation 
of a historic church and restoration of the central plaza. 
Although Gudino admitted that conflicts regarding community 
priorities occasionally arise between the council and the 
associations (with associations tending to favor 
beautification projects instead of badly needed 
infrastructure improvements), he described "Three-for-One" as 
a windfall for the financially depressed community. 
According to Gudino, Venustiano Carranza undertook 1 project 
in 2003, 3 projects in 2004, and 4 in 2005, demonstrating the 
growth of the program.  City Council members also described 
 
MEXICO 00002042  003 OF 003 
 
 
planned future projects for Econoff which may help revive 
local economic fortunes; the construction of a new fish oil 
processing plant and an irrigation project. 
 
¶8. (SBU) Implementing a different strategy than Venustiano 
Carranza, leaders in Cojumatlan have prioritized improvement 
of educational opportunities.  According to city Mayor 
Leonardo Hernandez, Cojumatlan has suffered a similar fate as 
Venustiano Carranza, losing nearly the entire youth 
population to migration due to lack of employment 
opportunities.  Despite exploring ways to attract tourism 
from being located on Lake Chapala, Cojumatlan has also seen 
its economic fortunes deteriorate.  However, Hernandez has 
implemented several specific programs designed to utilize the 
wealth created by migrants; 2005 saw the purchase of a new 
school bus as well as the construction of a new computer 
training center, both funded by donations by Cojumatlan's 
expatriate community in Oxnard.  Hernandez explained that the 
school bus was a critical need, allowing numerous secondary 
school students an educational opportunity for the first 
time.  While Hernandez agreed that most remittances sent 
directly to family members are used as subsistence income, he 
expressed hope that a new Caja Popular Mexicana credit union 
just built would be able to encourage local small business by 
offering financial services previously unavailable in 
Cojumatlan. 
 
COMMENT 
------- 
 
¶9. (SBU) "Three-for-One" and other independent programs based 
on remittance income offer potential for rural economic 
development.  The increasing prevalence of these programs 
demonstrate their popularity, and the growing power of 
migrant associations may promote greater accountability and 
transparency in local government.  However, the programs' 
ability to create significant economic advancements may 
depend on willingness to emphasize educational and 
infrastructure projects over beautification.  Moreover, 
contributions through government programs such as 
"Three-for-One" still represent a small percentage (estimated 
by the Bank of Mexico at 5%) of the total wealth transferred 
back to Mexico. 
 
¶10. (SBU) In general, remittances do not appear to have 
stimulated substantial economic growth in rural Mexico. 
Remittance income is literally enabling the existence of many 
towns such as Venustiano Carranza and Cojumatlan by taking 
the place of traditional agricultural income.  Buttressed by 
this artificial income source, these communities seem to defy 
the laws of global economics.  However, there may be a 
vicious cycle; because of systemic lack of investment and 
other external factors, they are dependent upon 
foreign-earned income for survival.  But as this dependence 
has increased, societal pressure encouraging the most 
productive members of the population to migrate has also 
increased.  For this reason the chances for economic revival 
may progressively become more remote.  While a great 
opportunity for Mexico, remittance income alone is probably 
not a panacea for Mexico's rural economic woes.  Instead, in 
some ways migration could be considered an addiction for 
rural Mexico - deleterious to the long-term health of a 
community but providing a short-term fix.  Without systemic 
educational and social reforms creating a stronger 
entrepreneurial culture, remittances are unlikely by 
themselves to fuel significant economic activity.  However, 
remittances may reduce the pressure to enact these difficult 
reforms, possibly explaining some of the policies and 
reactions regarding this issue by the elite Mexican political 
class. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity 
 
KELLY