by Fred Elbel

Remittances are monies sent by foreign-born workers (legal immigrants and illegal aliens) back to their home country. The transfers are facilitated by sending money through banks, making investments in the home country, or by returning to the home country while retaining bank accounts and other assets in the United States.

Remittances are essentially a tax-free transfer of wealth out of the U.S. Approximately $20 billion of Mexican remittances each year disappear from the U.S. economy via the institutionalized money transfer industry, never to return. While this massive amount may be considered virtual foreign aid, it is a non-sanctioned transfer of wealth that is based on a fundamental violation of America’s immigration and employment laws.

The massize size of remittances



Projecting $26 billion sent as tax-free remittances by illegal aliens to Mexico in 2014,44 the negative impacts of this loss on the American economy would be significant. That amount would purchase 1.5 million cars or 15-million computers, and $200 billion sent back to Mexico over the past 10 years would have purchased Americans an astounding number: 15 million cars along with 150 million additional computers.45 It well could have saved countless homeowners from foreclosure. Mexico received the largest amount of remittances in 2009). Of 10 countries receiving 40 percent of total remittances and related flows from the U.S., Mexico received about 61 percent of funds. Mexico’s central bank reported remittances totaling $21.27 billion in 2010. Remittances are indeed a significant source of income to Mexico. Remittance inflows of $25.3 billion to Mexico comprised approximately 3 percent of Mexico’s 2008 GDP.

The National Population Council estimates that more than one out of 10 Mexican families in approximately 1.3 million homes depends on remittances.28 In fact, according to a poll by the Inter-American Development Bank, as many as one in five Mexican adults receives money from relatives working in the U.S.29

The Bureau of Economic Analysis (BEA) estimated that 2009 migrants' remittances from the U.S. were approximately $48 billion, or approximately 70 percent more than total official development assistance provided by the United States. Of that amount, $38 billion consisted of personal transfers abroad. The remaining $11 billion consisted of wages paid to workers in the U.S., although some of those wages obviously were spent in the U.S.6

Remittances represent a staggering transfer of wealth worldwide. The International Monetary Fund (IMF) estimated total global flows of remittances — including compensation, personal transfers, and capital transfers — to be approximately $407 billion in 2008. This represented an increase of about $250 billion since 2002.5

The BEA estimated that countries in the Western Hemisphere received two-thirds of remittances in 2003, and Asia and the Pacific received one-quarter, while the remaining amount went to Europe and Africa. Unfortunately, the BEA did not report remittance data for specific countries; only "net private remittances" (outflows minus inflows) were reported. However, BEA did estimate that in 2009, approximately $20 billion in remittances was sent from the United States to Mexico. These remittances grew by 3 percent per year in inflation-adjusted 2009 dollars.5

Remittances are sensitive to economic fluctuations. From 1995 to 2003, the official count of Mexicans living in the United States increased by 56 percent and the median wage increased by 10 percent. Yet total remittances increased dramatically by 199 percent during those positive economic times.

Remittances to Mexico peaked at $26 billion in 2007, then declined during the subsequent recession. Even so, Mexican workers living in the United States did not return home in large numbers.9 One might conclude that a weakened economy in the U.S. still offered better wages than the Mexican economy.

The following chart is from a 2013 PEW research report revealing that $41 billion out of a total of $52.9 billion in remittances are sent to Latin America:46

Who makes remittances?



A 2007 survey by the Banco de Mexico found that one-fifth of migrants who sent remittances home worked in the U.S. construction sector.9 The amount of migrants’ remittances has increased by 3 percent per year since 2000 (see Table 1). The increase has been facilitated by increased ease of low-cost money transfers, coupled with a corresponding increase in the number of foreign-born workers in the U.S..

Although the Census Bureau estimated 23.9 million foreign-born workers in the U.S. in 2009, it should be noted that many believe Census Bureau numbers to be low, since for years the Bureau reported the number of illegal aliens in the United States to be an unvarying 8-12 million. The Social Contract addressed this issue in its Summer, 2007 issue, “How many illegal aliens are in the U.S.?”13 In that issue, a number of authors presented convincing evidence that the number of illegal aliens in the United States may be closer to 30-40 million. (See the CAIRCO article How many illegal aliens reside in the United States?).

How remittances are sent



U.S. remittance agents include banks, credit unions, post offices, money transfer operators, individual businesses, and chain stores (convenience stores, groceries, department stores). Home town associations, known as clubes des oriundos, facilitate collective transfers, and also maintain social ties between U.S. workers and communities in their home country.15

In 1996, approximately 14 million remittances were sent to Mexico, averaging $320 each. In 2000, approximately 17 million remittances were sent, averaging $365 each. By 2003, the number had jumped to approximately 40 million remittances at an average of $321 each. In 2010, the amount of the average remittance remained about the same at $302.16

In 2004, small money transfer operators had a 60 percent market share while Western Union had a modest 15 percent market share.17 However, at that time, the mechanism for transferring remittances from the U.S. to Mexico was undergoing a massive shift from a largely informal industry to institutional electronic transfers.18 In 1994, money orders comprised over 46 percent of the value of all reported transfers. By 2003, the share of money orders decreased to 12 percent and 86 percent of remittances were being made electronically.19 This was a tremendous opportunity for companies such as First Data/Western Union to compete for market share and profit potential.

A Colorado perspective



On July 22, 2004, Colorado-based First Data Corporation hosted a fourth national public “immigration reform” forum at North High School in a predominantly Hispanic Denver neighborhood.1 The school recently had been the focus of a national controversy as a consequence of displaying the Mexican flag in its classrooms.

In the audience, an American woman whose lineage dated back to the Pilgrims was brutally beaten by a woman who proclaimed in a Spanish accent, “You should leave! This is for us.” Mike McGarry, of Colorado Alliance for Immigration Reform, was told to “Go back to Ireland.” Nevertheless, after vociferously complaining about the forum’s obvious anti-immigration enforcement bias, he was given an impromptu seat on the panel. Not that it changed First Data’s business model.

The forums were not much more than targeted marketing events to promote wire transfers to immigrants and in particular to the illegal alien community. First Data Corporation, one of the world’s largest providers of money transfer services, reported that its second-quarter 2004 profit rose 32 percent as a direct result of revenue from Western Union, its money-transfer agency.2 This profit amounted to $1.1 billion in 2004 — from money transfers alone.

In the booming funds transfer industry, the number of Western Union agents world-wide grew from 30,000 in 1995 to 219,000 in 2004.3 Such phenomenal growth was worth fighting to protect. Indeed, in a vindictive political attempt to preserve their immense revenue stream, First Data subsequently formed a political action committee to oppose immigration reform candidate Tom Tancredo, who had reasonably suggested that remittances be taxed.

The larger view



The National Population Council estimates that more than one out of 10 Mexican families in approximately 1.3 million homes depends on remittances.28 In fact, according to a poll by the Inter-American Development Bank, as many as one in five Mexican adults receives money from relatives working in the U.S.

In Mexico, out-migration has devastated many Mexican villages.32 In rural areas that have been undermined by NAFTA, small agricultural communities have been particularly hard-hit as workers abandoned the locales.38 Rural agricultural systems have been impoverished by the double-whammy of NAFTA coupled with out-migration to the United States.

Illegal immigration is now much more closely associated with organized crime, which is creeping north into the U.S. Migratory routes into the U.S. have been taken over to a large extent by Mexican cartels. It is now quite common for illegal aliens to carry heavy loads of drugs — particularly marijuana — as they sneak across the border into the U.S. In 2007, $25 billion in cash from drug sales was smuggled out of the U.S. The amount quickly grew to $30 billion in 2008.39 It might be reasonable to investigate whether any of this drug money is transferred via the remittance infrastructure.

Mexico’s 2011 population was 114 million with a 1.4 percent rate of natural increase (births minus deaths). This seemingly low rate of constant increase would lead to a doubling of Mexico’s population in 50 years (per the Rule of 7035). Population is more accurately projected by the Population Reference Bureau to grow to 131 million by 2025 and to 143 million by 2050.36 With 28 percent of Mexico’s population under the age of 15 and 65 percent between the ages of 15 and 64, Mexico is a country of youth looking at a bleak future.37

Mass migration from Mexico to the U.S. acts as a two-fold safety valve. It reduces population pressure in Mexico while allowing population to continue to grow with less adverse effects, thus discouraging implementation of viable domestic population policies. Mass migration also encourages dissatisfied young males to leave their homeland, where they might agitate and fight for societal change if they remained at home. Remittances facilitate this mass migration, and indeed, the ease of making remittances can be considered a motivating factor for workers to leave the country.

Related articles



Remittances - a Massive Transfer of Wealth, by Fred Elbel, The Social Contract, Spring, 2012.

Remittances Abet Mexican Officials Irresponsible Behavior, Center for Immigration Studies, September 26, 2013

Remittance-Senders (Mostly Illegals) Ship $25 Billion a Year Out of the U.S., Center for Immigration Studies, October 31, 2010

Remittances to Mexico (2009), FAIR, 2009

References



1. “First Data Immigration Reform panel in Denver,” Colorado Alliance for Immigration Reform, July 22, 2004, http://www.cairco.org/events/firstdata2004jul22a.html

2. Bloomberg News, “First Data reports big profit jump,” The Denver Post, July 21, 2004.

“Greenwood Village-based First Data Corp., the world’s largest processor of credit-card payments, said today its second-quarter profit rose 32 percent, helped by an increase in revenue at Western Union, its international money-transfer agency…Net income rose to $466 million from $353.8 million a year earlier, First Data said in a statement. Sales increased 22 percent to $2.53 billion...”

3. Nicholas Johnston, “First Data and Its Congressman Clash Over U.S. Immigration,” Bloomberg, May 16, 2005, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKmMLvHBrmJs&refe...

4. Aldo Svaldi, “Border skirmish — Rep. Tancredo’s proposals for immigrant remittances draw First Data Corp. into public policy debate,” The Denver Post, June 27, 2004.

5. “Migrants’ Remittances and Related Economic Flows,” Congressional Budget Office, (February, 2011): 2. http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf

6. “Migrants’ Remittances and Related Economic Flows,” Congressional Budget Office, (February, 2011): 1. http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf

7. “Migrants’ Remittances and Related Economic Flows,” Congressional Budget Office, (February, 2011): 5. http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf

8. Nancy Bolton, “The Challenge of Accurately Estimating the Population of Illegal Immigrants,” The Social Contract (Volume 17, Number 4, Summer 2007), http://www.thesocialcontract.com/artman2/publish/tsc_17_4/tsc_17_4_bolto...

9. “Remittances to Mexico - Cross-Border Money Flows Slowed by U.S. Slump,” SouthWest Economy, Federal Reserve Bank of Dallas, First Quarter 2010, http://dallasfed.org/research/swe/2010/swe1001d.pdf

10. Ricardo Lopez, “Remittances to Mexico are rebounding,” Los Angeles Times, January 11, 2012, http://www.latimes.com/business/la-fi-mexico-remittances-20120112,0,6700...

11. Nacha Cattan, “Mexico Remittances Rise the Most in 5 Years on Cheaper Peso,” Bloomberg.

November 2, 2011, http://www.businessweek.com/news/2011-11-02/mexico-remittances-rise-the-...

12. “Migrants’ Remittances and Related Economic Flows,” Congressional Budget Office, (February, 2011): 6. http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf

Census Bureau data from “Current Population Surveys, Outgoing Rotation Groups, 1995 to 1999,” U.S. Census Bureau

13. “How many illegal aliens are in the U.S.?”, The Social Contract (Volume 17, Number 4, Summer 2007) http://www.thesocialcontract.com/artman2/publish/tsc_17_4/index.shtml . See CAIRCO article How many illegal aliens reside in the United States?

See specific articles: James H. Walsh , “Illegal Aliens: Counting the Uncountable", The Social Contract (Volume 17, Number 4 Summer 2007) http://www.thesocialcontract.com/artman2/publish/tsc_17_4/tsc_17_4_walsh...

Nancy Bolton, “The Challenge of Accurately Estimating the Population of Illegal Immigrants,” The Social Contract (Volume 17, Number 4, Summer 2007), http://www.thesocialcontract.com/artman2/publish/tsc_17_4/tsc_17_4_bolto...

Fred Elbel, “How Many Illegal Aliens Are in the U.S.? — An Alternative Methodology for Discovering the Numbers,” The Social Contract (Volume 17, Number 4, Summer 2007), http://www.thesocialcontract.com/artman2/publish/tsc_17_4/tsc_17_4_elbel...

14. “Migrants’ Remittances and Related Economic Flows,” Congressional Budget Office, (February, 2011): 10. http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf

15. Raul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor — Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No, 47,” The World Bank, Washington, DC, (2005): 30. http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

16. “Remittances to Mexico up marginally in 2010,” Fox News Latino, February 2, 2011

http://latino.foxnews.com/latino/money/2011/02/02/remittances-mexico-mar...

17. Raul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor — Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No, 47,” The World Bank, Washington, DC, (2005): 11.

http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

18. Raul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor - Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No, 47,” The World Bank, Washington, DC, (2005): 10, 22. http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

19. Raul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor — Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No, 47,” The World Bank, Washington, DC, (2005): 22. http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

20. Raul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor — Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No, 47,” The World Bank, Washington, DC, (2005): 22. http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

21. “Background on the Mexican matricula consular (illegal alien) ID card in Colorado,” Colorado Alliance for Immigration Reform, 2003, http://www.cairco.org/matricula/matricula_background.html

22. “Migrants’ Remittances and Related Economic Flows,” Congressional Budget Office, (February, 2011): 11. http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf

Data source: Congressional Budget Office based on Bureau of Economic Analysis data.

23. “Migrants’ Remittances and Related Economic Flows,” Congressional Budget Office, (February, 2011): 7. http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf

Data source: Congressional Budget Office based on Bureau of Economic Analysis data.

24. “Remittances to Mexico up marginally in 2010,” Fox News Latino, February 2, 2011,

http://latino.foxnews.com/latino/money/2011/02/02/remittances-mexico-mar...

25. “Migrants’ Remittances and Related Economic Flows,” Congressional Budget Office, (February, 2011): 8. http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf

Data source: Congressional Budget Office based on Bureau of Economic Analysis data.

26. “Remittances to Mexico — Cross-Border Money Flows Slowed by U.S. Slump,” SouthWest Economy, Federal Reserve Bank of Dallas, First Quarter 2010, http://dallasfed.org/research/swe/2010/swe1001d.pdf

27. Paul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor — Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No. 47,” The World Bank, (2005): 4. http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

28. Stevenson Jacobs, “Remittances up by 40 percent,” The News, November 2, 2001, http://www.thenewsmexico.com/noticia.asp?id=11970

(archived: http://web.archive.org web/20021114162537/http://www.thenewsmexico.com/noticia.asp?id=11970)

29. Paul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor — Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No. 47,” The World Bank, (2005): 30. http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

30. “Remittances Profile: Mexico,” Migration Policy Institute, circa 2009, http://www.migrationinformation.org/datahub/remittances/Mexico.pdf

31. Frontera NorteSur, “Remittances, Mexican Migration and Emerging World Trends,” Mexidata.info

July 26, 2010, http://mexidata.info/id2748.html.

Data compiled by BBVA Bancomer.

32. Jay Root, “Migration of working-age people has devastated many Mexican villages,” Knight Ridder Newspapers , Mar 23, 2006, http://www.axisoflogic.com/artman/publish/printer_21528.shtml.

“Heavy migration has all but emptied much of the Mexican countryside.... In five states, including Zacatecas, remittances from abroad now equal 100 percent or more of the salaries generated locally. In the state of Michoacan, money sent home from the United States is 182 percent of in-state incomes…. No corner of Mexico has been left untouched by emigration. In 31 percent of Mexico’s municipalities, population is shrinking steadily because of migration to the United States, according to figures provided by Garcia Zamora.”

33. Paul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor — Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No. 47,” The World Bank, (2005): 30. http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

Source: Ginger Thompson, “A Surge in Money Sent Home by Mexicans,” New York Times, October 28, 2003.

34. Paul Hernandez-Coss, “The U.S.-Mexico Remittance Corridor — Lessons on Shifting from Informal to Formal Transfer Systems, World Bank Working Paper No. 47,” The World Bank, (2005): 38. http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871...

35. The Rule of 70 is useful for financial as well as demographic analysis. It states that to find the doubling time of a quantity growing at a given annual percentage rate, divide the percentage number into 70 to obtain the approximate number of years required to double. For example, at a 10 percent annual growth rate, doubling time is 70/10 = 7 years.

http://www.ecofuture.org/pop/facts/exponential70.html

36. “2011 World Population Data Sheet,” Population Reference Bureau, 2011, http://www.prb.org/pdf11/2011population-data-sheet_eng.pdf

37. “CIA World Factbook - Mexico.” Central Intelligence Agency, February, 2012, https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html

38. “NAFTA and U.S. Corn Subsidies: Explaining the Displacement of Mexico’s Corn Farmers,” Prospect Journal of International Affairs at UCSD (April, 2010), http://prospectjournal.ucsd.edu/index.php/2010/04/nafta-and-u-s-corn-sub...

39. Wilson Beck, Wakeup Call From Mexico, (MuchoPress, 2009), p. 253. Dollar estimates are from the U.S. Department of Justice.

40. White House, “Democrats Applaud Mexican President Slamming Arizona Law,” FoxNews, May 20, 2010, http://www.foxnews.com/politics/2010/05/20/mexicos-calderon-takes-case-c...

41. “National Population Projections, 2008,” U.S. Census Bureau (2008),

http://www.census.gov/population/www/projections/summarytables.html

42. “Question: Where does the Census Bureau say we’re heading by 2060?”, NumbersUSA

https://www.numbersusa.com/content/learn/about/question-where-does-censu...

43. Charles Hugh Smith, “What’s the Real Unemployment Number?”, Daily Finance, February 9, 2011

http://www.dailyfinance.com/2011/02/09/real-unemployment-number/

44. Wilson Beck, Wakeup Call From Mexico, (MuchoPress, 2009),

From Table 7 in this report, $19.9 billion was sent to Mexico in personal remittances in 2009 and is growing at an average of 3 percent per year. Assuming a 3 percent inflation rate, remittances reported in Table 7 would converge with Beck’s amount in 2014.

Inflation in February, 2012 was 2.93 percent: Annual Inflation, InflationData.com (February, 2012)

45. Wilson Beck, Wakeup Call From Mexico, (MuchoPress, 2009)

46. Remittances to Latin America Recover—but Not to Mexico, by D’Vera Cohn, Ana Gonzalez-Barrera and Danielle Cuddington, Pew Research Hispanic trends Project, November 15, 2013. Read the full report.

47. U.S. Govt. Banking Program Facilitates Remittances To Mexico, by Judicial Watch, Apr 7, 2016:

...a U.S. government program is largely responsible for the billions in remittances flowing south of the border from illegal [alien] immigrants. The program is called “Directo a Mexico” (Direct to Mexico) and the Federal Reserve, the government agency that serves as the nation’s central bank, launched it nearly a decade ago. Judicial Watch investigated the outrageous taxpayer-subsidized initiative and obtained government records back in 2006. It was created by President George W. Bush following the 2001 U.S.-Mexico Partnership for Prosperity, undermines our nation’s immigration laws and is a potential national security nightmare. The goal was to provide low-cost banking services to illegal immigrants and facilitate the process for those sending money home. Remittances are transferred through the Federal Reserve’s own automated clearinghouse linked directly to Mexico’s central bank (Banco de Mexico). At the time Federal Reserve officials acknowledged that most of the Mexicans who send money home are illegal immigrants so a Mexican-issued identification is the only requirement to use the government banking service. A colorful brochure promoting “Directo a Mexico” offered to help immigrants [illegal aliens] who don’t have bank accounts and assured the best foreign exchange rate and low transfer fees... In short, the U.S. created this special banking system specifically for illegal aliens and tens of billions of dollars have flowed through it, according to figures obtained by JW from Banco de Mexico. This is worth noting because news coverage of Trump’s plan to fund a wall along the Mexico-U.S. border has omitted this important information, instead focusing on the negative impact to the Mexican economy if remittances are cut...

48. International Remittances - Actions Needed to Address Unreliable Official U.S. Estimate, GAO - Government Accountability Office, February, 2016.

49. Remittances to Latin America, Caribbean Hit $68.3 Billion in 2015, Wall Street Journal, February 16, 2016.

50. Remittances to Latin America and the Caribbean in 2016: A New Record, Center for Latin American Monetary Studies (CEMLA).