Financial Bloodsucking Update
10/19/2006
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You know the problem of remittance dependence is getting bad when a top Mexican banker criticizes it. Mexico has become a bloated welfare queen, munching tacos and bon bons on the backs of its exported workforce who dutifully send increasing piles of dollars to the homeland.

The easy money of remittances from Mexican expatriates enables Mexico to avoid investing in needed infrastructure and education, protecting its small class of ultra-rich while pushing tens of millions of poor onto the backs of American taxpayers.

Among Mexican leaders, only Central Bank Gov. Guillermo Ortiz understands that American border security would ultimately be beneficial for Mexico. "It would be best to keep its people in Mexico, and it would give incentives for Mexico to create jobs that are needed," he remarked recently.

Investors Business Daily noted that rare bit of intelligence floating up from Mexico, [ Fencing In Human Capital, 10/16/06] and included a map showing the correlation between remittances, poverty and civil unrest.

Mexico remittance map

Once again, the Central Bank of Mexico is on top of this, well ahead of the rest of the Mexican government.

In a 2005 study, that bank found a negative link between development and remittances 151 the more remittances, the less overall development. The bank even went so far as to suggest poverty was caused by the dependency, not the other way around.

Because most cash sent back is used for consumption, and not investment, it gives only a short-term boost to GDP.

"Evidence also suggests that members of recipient households have fewer incentives to search for alternative sources of income," the bank noted, describing a burgeoning private welfare culture. [...]

That's why the wall issue is such a tinderbox for Mexico's government. If the wall couldn't work, the government wouldn't worry. But it will. And the government knows if Mexico stops exporting people to the U.S., it will have to extensively reform the economy.

Recent news from money transfer biz shows explosive growth in remittances [Immigrants seen sending $45 bln from U.S. to Latam, Reuters 10/18/06]

Some 12.6 million, or 73 percent of all adult Latin Americans living in the United States, will send a total of around $45 billion to their countries of origin this year, up from some $30 billion in 2004, the report said.

The percentage of immigrants sending money on a regular basis has increased from 61 percent in 2004 to 73 percent in 2006, said the bank, and the average amount of each remittance also grew, from $240 to $300.

That sucking sound you hear is American wealth being transferred to the third world.

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