VZCZCXRO9371
PP RUEHCD RUEHGD RUEHHO RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHMC #0489/01 3041818
ZNR UUUUU ZZH
P 301818Z OCT 08
FM AMCONSUL MONTERREY
TO RUEHC/SECSTATE WASHDC PRIORITY 3226
INFO RUEHME/AMEMBASSY MEXICO PRIORITY 4248
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHMC/AMCONSUL MONTERREY 8743

UNCLAS SECTION 01 OF 03 MONTERREY 000489 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SOCI ECON EFIN PGOV CVIS MX
SUBJECT: FALLING REMITTANCES HIT NORTHERN MEXICAN FAMILIES HARD 
 
MONTERREY 00000489  001.2 OF 003 
 
 
¶1.  (U)  Summary: After years of steady increases in remittances 
sent by Mexican workers in the U.S. to their families in Mexico, 
the current U.S. economic slowdown has caused a sudden drop in 
such payments.  The decline in remittances stems from the 
concentration of Mexican workers in the construction sector and 
other industries affected by U.S. economic problems.  Here in 
Northern Mexico, local government officials, bankers, 
businessmen, academics and social workers all report that 
numerous factors, including a dramatic shift in remittances from 
Mexican nationals working in the U.S., are contributing to 
economic dislocation in the region.   However, our contacts do 
not believe that declining job prospects in the U.S. will result 
in reverse migration back to Mexico, but rather most workers 
will stay in the U.S. in lesser paying jobs.  End Summary. 
 
 
 
DECLINE IN REMITTANCES ACROSS MEXICO 
 
--------------------------------------------- ------------- 
 
 
 
¶2.   (SBU)  According to a regional representative from the 
central Bank of Mexico, remittances sent from Mexicans working 
in the United States declined seven percent from the third 
quarter of 2007 to the third quarter of 2008.  This is the first 
such annual decline recorded since the bank began collecting 
this data in 1999, and represents a dramatic downturn from 
record increases of 25 percent observed in 2006.   The adverse 
economic effects of this sudden change are substantial. 
Remittances to Mexico in 2007 amounted to almost $24 billion, 
roughly equivalent to the rate of direct foreign investment in 
the same year.   In comparison, Mexico garnered $38 billion from 
oil exports and $13 billion from tourism in 2007. 
 
 
 
¶3.  (SBU)  The Bank of Mexico conducts detailed demographic 
surveys of workers who send remittances and the families that 
receive them.  The latest survey shows that two-thirds of 
Mexicans working in the U.S. regularly send monies home, with 
the primary recipients being parents (69 percent) followed by 
spouses (12 percent).  Over half of the workers earn $1000-$2000 
monthly; another third earn over $2000.   The amount sent home 
monthly averages over $430 for recent arrivals (less than 5 
years), but declines over time to $340 for long-term workers (11 
years or more).  Over two-thirds of workers sending remittances 
have no high school education.  Over half of the workers have 
two to four dependents living with them in the U.S.  The survey 
showed that 86 percent of the money sent is used for basic 
maintenance and consumption; six percent is used for education; 
and only one half of one percent is used for community 
improvements or small business development. 
 
 
 
¶4.  (SBU)  Mexican nationals working in the United States 
gravitate towards three sectors: hospitality and food services 
(54 percent), construction (23 percent) and manufacturing (14 
percent).  The heaviest decline in employment over the past year 
has been in the hard-hit construction industry.  However, the 
unemployment rate for Mexicans in the United States has only 
inched up from five to seven percent, suggesting that they have 
left the United States or moved to other jobs.   The report from 
the Bank of Mexico indicates that the decline in construction 
employment tracks very closely with the drop in remittances. 
 
 
 
CRISIS IMPACTS NORTHERN MEXICO 
 
--------------------------------------------- ---- 
 
 
 
¶5.  (SBU)  Economic dependence on income from workers in the 
United States varies across Mexico, with the rural southern and 
central states being far more susceptible than the north to any 
disruption in remittances.   The most vulnerable states are 
Michoacan (10.4 percent of GDP from remittances), Oaxaca (8.2 
percent), Zacatecas (7.8 percent), Guerrero (7.6 percent) and 
Hidalgo (7.2 percent).  In the more industrialized areas of the 
northern border region, the economic displacement of Mexicans 
from rural to urban areas is a larger concern than the drop in 
remittance income.  The north-eastern state of Nuevo Lesn 
receives less than one-half of one percent of its GDP from 
remittances, but state officials report that social services are 
increasingly stressed by migrants from the neighboring rural 
 
MONTERREY 00000489  002 OF 003 
 
 
states of Tamaulipas, Durango, and Zacatecas. 
 
 
 
¶6.  (U)  Of the north-central states, Zacatecas has felt the 
strongest economic impact.  Millions of Zacatecans live and work 
in the U.S., with large concentrations in Dallas, Oklahoma City, 
Los Angeles, and Chicago; we understand that half the 
native-born population of Zacatecans lives in the United States. 
 A representative from Zacatecas reports that the decline in 
remittances is having a dramatic effect on the rural populations 
in his state, reducing discretionary spending and forcing many 
families to return to subsistence agriculture.  As families cut 
back on spending, service industries have suffered a 
corresponding loss of income, sending ripple effects through the 
local economy. 
 
 
 
¶7.  (U)  Rural areas of Durango are also experiencing economic 
dislocation.  During a recent consular visit to the town of 
Santiago Papasquiaro, the mayor complained of a 30 percent drop 
in attendance at the town's annual harvest festival.   He 
related that in previous years, many migrant workers would 
return to the area from the U.S. to attend the fair, and bring 
their families along.  This year, very few workers could afford 
the trip, and those that did had less money to spend.  The local 
shops and restaurants were also suffering, as local families had 
less disposable income. 
 
 
 
¶8.  (U)  The decline in remittances has also affected the 
Mexicans families ability to pay their bills.  A contact in the 
collection department of a large U.S. credit company reports 
that delinquent payments are much higher because the families 
receive their money to pay the credit card bills from 
remittances. 
 
 
 
¶9.  (U)  Cemex, a leading cement producer headquartered in 
Monterrey, sponsors several philanthropic programs to aid 
low-income families in Mexico.  The Construmex program allows 
Mexican workers in the U.S. to purchase cement and other 
construction materials for their families back in Mexico to make 
`self-help' improvements to their homes.  During a recent 
international conference on philanthropy in Monterrey, a Cemex 
executive revealed that participation in this program had fallen 
by 20-30 percent over the past year. 
 
 
 
IMPACT ON IMMIGRATION AND TRAVEL TRENDS 
 
--------------------------------------------- ------------------- 
 
 
 
¶10.  (U)  Applications for non-immigrant visas in 2008 are down 
in every post in Mexico with the exception of Ciudad Juarez (the 
increase in Ciudad Juarez is attributed to an anticipated surge 
of visa renewals, echoing a 1998 surge of applications for the 
then-new border crossing card).  An analysis of visa trends from 
Mexico, presented at the recent Mexico consular chiefs 
conference in Monterrey, reveals that visa application levels 
have historically tracked very closely with the state of the 
American economy.  Recent increases in application fees, coupled 
with increases in Mexican passport fees have also contributed to 
this decrease in visa demand, as the overall cost of applying 
for visas becomes out-of-reach for many low-income Mexican 
families.  Concurrently, approval rates for non-immigrant visas 
in Monterrey have increased inversely to the number of 
applications, indicating that many economically marginal visa 
applicants may now be `self-selecting out.' 
 
 
 
¶11.  (U)  Despite scattered anecdotal reports to the contrary, 
authorities in Mexico do not anticipate a surge in returning 
workers.  Many of the Mexican nationals in the U.S. who have 
recently lost jobs due to the economic downturn have very little 
economic incentive to return to their homes in Mexico, where job 
conditions are often much worse.  Instead, most are expected to 
seek  jobs in the U.S. further down the income scale, moving 
from the construction and industrial sectors to agriculture or 
food service.  The rare exceptions to this trend are generally 
recent immigrants from the middle class, who have found that the 
job market in the U.S. was not as welcoming as in past years, 
 
MONTERREY 00000489  003.2 OF 003 
 
 
and who may still have economic opportunities in Mexico. 
 
 
 
COMMENT 
 
--------------- 
 
 
 
¶12.  (U)  Comment.  The economic crisis in the United States 
will continue to bring repercussions to Mexico in the form of 
decreased remittances, tourism, and direct foreign investment. 
While the industrialized northern regions of the country are 
less susceptible to negative effects from a decrease in 
remittances, the ripple effects from decreased foreign 
investment and increased internal displacement will be strongly 
felt in all urban areas.  First-time visa applications and 
immigration to the U.S. -- both legal and illegal -- will likely 
continue to slow from recent historical highs, although it 
appears unlikely that we will see any large-scale reverse 
migration in the near term.    End Comment. 
WILLIAMSON