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INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
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174485
2008-10-20 22:04:00
08MEXICO3108
Embassy Mexico
UNCLASSIFIED

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ZNR UUUUU ZZH
R 202204Z OCT 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 3633
RUEHC/DEPT OF LABOR WASHINGTON DC
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
TAGS: ELAB ECON SMIG SOCI PINR PGOV MX
UNCLAS SECTION 01 OF 03 MEXICO 003108 
 
SIPDIS 
 
DEPT FOR DRL/AWH AND ILSCR, WHA/MEX, USDOL FOR ILAB 
 
E.O. 12958: N/A 
TAGS: ELAB ECON SMIG SOCI PINR PGOV MX
SUBJECT: : MEXICANS DIFFER ON THE EFFECTS OF FINANCIAL 
CRISIS ON EMPLOYMENT, REMITTANCES AND MIGRATION  
¶1.  Summary:  Mexican opinion makers, academics, legislators 
and government officials are expressing vastly different 
views with regard to the effect on Mexico of the ongoing US 
financial crisis.  Beyond the purely financial crisis, the 
areas of primary concern for Mexicans in this broader 
economic crisis are unemployment, the decline in remittances 
and possible reverse migration.  Almost everyone expressed 
concern over the significant drop in remittances from migrant 
workers in the United States.  Many opinion leaders and 
academics are concerned that this drop will increase poverty 
levels in Mexico.  They are also concerned about the negative 
impact on employment if the downturn in the US economy 
prompts large-scale reverse migration back to Mexico.  One of 
the main spokespeople for the GOM on employment, Secretary of 
Labor Javier Lozano, has suggested that only a limited number 
of migrants would return home.  He has assured the Mexican 
Congress and the public that these returnees could easily be 
accommodated within currently projected rates of job growth. 
The position of most legislators on the potential return of 
migrant workers seems largely determined by political party 
affiliation, with the  legislators in the ruling National 
Action Party (PAN) more or less supporting Lozano,s 
position.  Opposition legislators (and even Mexico,s Central 
Bank) are much less inclined to agree with Secretary 
Lozano,s somewhat optimistic position, at least with regard 
the country,s job growth projections. End Summary. 
 
 
&A COLD CAN LEAD TO PNUEMONIA8 
------------------------------ 
 
¶2.  One of the most frequently repeated Mexican sayings 
regarding the complexity of US-Mexico economic relations 
states that when the United States catches a cold, Mexico 
gets pneumonia.  The truth of this saying is currently being 
discussed in many sectors of Mexican society as a broad range 
of opinion makers, labor organizations, academics, 
legislators and government official speculate about the 
affects on Mexico of the ongoing US financial crisis.  The 
main topics of concern are the drop in the level of 
remittances arriving from the U.S., the possibility of 
large-scale reverse migration and resulting unemployment. 
 
¶3. Although there is a broad range of opinions on many 
aspects of how the US financial situation will ultimately 
affect Mexico, there is unanimous agreement on the fact that 
there has been a significant drop in the level of remittances 
arriving from Mexican migrant workers in the United States. 
The Bank of Mexico has cited a 12.2 percent drop during 
January-August 2008 compared with the same period in 2007. 
As is often the case, the figure cited on the drop in 
remittances varies significantly depending on the political 
orientation of the speaker.  The leader of the National 
Agricultural Workers Confederation (CNC), an affiliate of the 
PRI (Institutional Revolutionary Party), Mexico,s former 
ruling party, claims that some regions of the country have 
seen remittances drop by as much as 30 percent. 
 
INCREASE IN POVERTY RATES 
-------------------------- 
¶4.  The decrease in remittances has promoted calls for action 
in the form of increased government spending on social 
programs from legislators from all of Mexico,s major 
political parties.  The main concern of many of those 
engaging in this debate is that decreased remittances will 
soon prompt a sharp rise in poverty rates.  In testimony 
before the Mexican Senate the GOM,s Secretary of Social 
Development, Ernesto Cordero,acknowledged that the fall in 
the level remittances could prompt an increase in the number 
of families living below the poverty level. According to 
INEGI, the GOM,s National Statistics Institute, 82 percent 
of Mexico,s population has an income somewhere between one 
and five time the daily minimum wage.  (Note: The daily 
minimum wage is about 52.59 pesos or roughly USD 4.38). 
INEGI calculates that the income of an average Mexican family 
is about 3.5 times the daily minimum wage; which is 
considered just high enough to keep them above the poverty 
level. 
 
¶5. Mexican President Felipe Calderon has announced a 
five-point emergency spending plan in an attempt to protect 
Mexico from the challenging globabl economic environment. 
 
MEXICO 00003108  002 OF 003 
 
 
The proposal calls for an additional 53 billion pesos to be 
spent over the next year on infrastrucuture, education, and 
energy, including the construction of a refinery that would 
in part be funded by one of the country,s oil stabilization 
funds. 
 
 
¶6.  To date, the drop in remittances has had a major impact 
on a number of Mexican states, according to Raul Delgado a 
professor of development studies at the Autonomous University 
of Zacatecas.  Delgado noted that with severe negative 
implications on poverty levels, on 17 of Mexico,s 31 states: 
Hidalgo, Jalisco, Mexico City, Chiapas, Aguascalientes, 
Mexico State, Veracruz, Guanajuato, Queretaro, Michoacan, 
Colima, Sinaloa, Tabasco, Oaxaca, Campeche, Sonora and 
Yucatan. Continuing on, Delgado stated that the drop in 
worker remittances for the first half of 2008 when compared 
to the same period in 2007 in millions of dollars for the 
seven worst hit states is as follows: 
 
   2007                  2008 
 
Hidalgo           472.3                  418.3 
Jalisco           981.3                  927.5 
Mexico City       684.8                  646.2 
Mexico State      983.5                  958.1 
Aguascalientes    178.7                  143.9 
Chiapas           382.0                  347.2 
Veracruz          720.4                  699.2 
 
 
 
 
REVERSE MIGRATION? 
------------------ 
 
¶7. Participants in this national debate more or less agree 
that Mexico should be prepared for the possibility that the 
economic downturn in the United States could prompt 
large-scale reverse migration.  Several academics quoted in 
the national press noted that a large percentage of Mexicans 
migrants are employed in the US construction industry.  Given 
the current difficulties in the US job market in general and 
the housing industry in particular, these academics believe 
that some degree of reverse migration is inevitable.  The 
questions these academics pose is how large will this reverse 
migration eventually be and what will Mexico do with these 
returning migrants? 
 
¶8.  The most conservative estimate of the number of migrants 
who might return to Mexico was put forth by GOM Labor 
Secretary Labor Javier Lozano who believes only some 200,000 
migrants will return home from the US.  The CNC calculates 
that some 350,000 migrants will come back to Mexico looking 
for work.  Thus far the only governor to speak out openly on 
this matter is Amalia Garcia of Zacatecas. Governor Garcia 
explained that Zacatecas is especially concerned about the 
possibility of large scale reverse migration since her 
administration estimates that fully fifty percent of the 
state,s population has migrated to the US over the last 
decades. 
 
¶9.  Taken in context, neither the figure cited by Labor 
Secretary Lozano nor the one offered by the CNC are 
particularly large given that the GOM,s National Migration 
Institute calculates that 10 percent of Mexico,s estimated 
population of 106 million people now lives in the United 
States.  In a worse case scenario, if the financial situation 
in the US were to generate large-scale reverse migration, in 
all probability, Mexico,s governmental and social 
institutions would quickly be overwhelmed.  However, the 
possibility of significant numbers of Mexican migrants 
returning home from the US is extremely remote.  These 
migrants left Mexico because there was nothing to hold them 
in their own country and most are fully aware that they have 
nothing to come back to especially since, over time, many 
have succeeded in arranging for their families to join them 
in the United States. 
 
 
EMPLOYMENT AND OTHER CONUNDRUMS 
------------------------------- 
 
 
MEXICO 00003108  003 OF 003 
 
 
¶10.  Although there appears to be little real chance of any 
large-scale reverse migration there will undoubtedly be some 
migrants who will choose to return to Mexico as a result of 
the financial situation in the United States.  It is 
impossible tell how many migrants will decide to come back to 
Mexico.  That being the case Labor Secretary Lozanzo,s 
guesstimate of 200,000 is as good a number as any.  Sticking 
firmly to his estimate Lozano has publicly stated several 
times that Mexico can easily provide employment for the 
relatively small number of migrants that are likely to return 
from the US.  According to Lozano, there are currently many 
more jobs than that available on offer at the job bank run by 
the Secretariat of Labor.  Moreover, Lozano said, if one 
counts the number of jobs generated on the informal economy, 
the number of jobs created since the start of the Calderon 
administration is well over one million. 
 
¶11.  This statement by Lozano may be factually true with 
regard to the number of jobs on offer at his Secretariat but 
it is not particularly relevant to the real employment 
scenario en Mexico.  At given time there are always a large 
number of jobs on offer throughout many parts of Mexico. 
The problem is that the potential job seeks are unqualified 
for many of the higher skilled jobs and the salaries being 
offered for unskilled jobs are only a fraction of what a 
worker could earn doing a similar job in the United States. 
Not only that, but the salaries offered in Mexico for 
unskilled labor are often so low that most workers do not 
consider them a living wage. 
 
¶11.  Labor Secretary Lozano,s statement about the existence 
of ready employment in Mexico for any migrants who may decide 
to return home (if one includes the informal economy) has 
been tepidly supported by PAN legislators in the Mexican 
Congress.  Opposition legislators have dismissed Lozano,s 
claims.  The dismissal by opposition legislators has only 
been reported pro-forma in the national press.  Instead the 
real focus with respect to the Labor Secretary,s statement 
has been on comments made by officials of the Bank of Mexico, 
the country,s central bank. 
 
¶12.  According to these officials job growth on Mexico,s 
(formal) economy for his year is only projected to be about 
372,000.  If this figure holds true, the Bank of Mexico 
officials averred, it would be hard to credit the Calderon 
administration,s job creation figures.  In support of this 
statement the officials pointed to the fact that when Mexico 
experienced a similar financial crisis in 1994 the country 
lost over 400,000 jobs. 
 
 
COMMENT 
------- 
 
¶13. At this point no one in the media, labor organizations, 
or government has presented any compelling evidence of what 
impact the US financial crisis will have on Mexico.  It is 
very unlikely that there will be any significant (voluntary) 
reverse migration.  The drop in remittances from migrant 
workers in the United States is probably the most immediate 
problem Mexico will have to deal with and it appears that 
President Calderon,s administration has begun to take some 
steps to address this matter. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity and the North American 
Partnership Blog at http://www.intelink.gov/communities/state/nap / 
GARZA