The remittances, and the oil exportations, the direct foreign investment, and the foreign tourism, are the main income sources of dollars in Mexico. The Mexican transferences of people living outside Mexico, make a total of 13 thousand 400 million dollars in 2003 and 16 thousand 600 million dollars in 2004, obtaining a maximum historic cipher, and representing a 2.5% of the GIP of 640 thousand million dollars in the same year. The central bank and the analysts predict that the foreign remittances will increase to 20 thousand million dollars at the end of 2005. This happens because of the quantity of electronic transactions – the main source for sending remittances- increased 22% between January and April 2005. Meanwhile, the average value of the remittances increased to 340 dollars in April, from the average of 334 dollars registered in March.

The experts say that the remittances increase is because of the great quantity of Mexicans living in the USA, to a better delivery registration and to  better life conditions in that country which allows to send them more money. According to Mexican Governmental information, there is 10.2 million of Mexican living in the United States and another 16 million people with Mexican origin in that country. In Mexico the family remittances reach between 20% and 25% of the population with less income which implies that each family receives at least 2 basic salaries per month. The foreign currency in turn, benefits an 18% of the 22 million homes of the country. We are talking that one of five homes is supported by the foreign remittances, being these very important for the Mexican economy.

Now, let’s put in context, what the remittances towards Mexico mean for the international flow of money. For fifth serial year, Mexico is located in second place at world’s level, in the amount of received family remittances according to the Worlds Bank information. India was located in first place, receiving 23 thousand million dollars during 2004. In its report called “World flows of financing for development”, the World Bank gave the detail that in 2004, the countries in via of development, received 125 thousand 800 million dollars in remittances, 8.5% more than in 2003. Latin America picked up 36 thousand 900 million dollars in 2004, being Mexico the main recipient with 46% of the total of foreign currency. Something equally impressive, according to data of the IDB, is that Mexico monopolizes 14% of the world’s remittances. It is a fact that the remittances in Latin America are much more than all the direct investment and help for development that comes from outside.

As reasons for the increase in the total of the remittances, we have the fall of the shipment costs, because the rates have been reduced in a 60% since 1999 in the case of USA to Mexico. There is also the increase of migration, joined to a better measurement of it, which has impelled these remittances. The depreciation of the dollar in front of other currencies, particularly the euro, has increased the value in dollar terms of the remittances received in other countries currencies, which has also impelled the growth of the money shipment. And finally, the security measures established by the migratory authorities in different countries have encouraged the money shipments from the undocumented immigrants. In spite of all the improvements in informatics, the World Bank recognizes that the official ciphers could be under estimated because of the existence of informal channels of shipment, besides that some countries haven’t made any effort in order to rule the report of the money that was send.

An indicator that reflects the biggest importance in the remittances is its growing impact in the foreign accounts. The foreign currencies for family remittances in 2000 represented 3.4% of the income in the current account of the pay balance; 4 years later that proportion turned into 7.4%. This is not a cyclical flow, which is independent of the economic cycle; if there is a recession, in one way or another; people continue sending more or less the same amount of money, which gives to the pay balance soundness, which at the end is a positive factor.

But not everything is positive or prosperous in the remittance frame. As in Ecuador, Mexico doesn’t take advantage of the potential from the remittances that come from outside. These resources used properly can help to revert this situation in which many citizens have the need to leave home because the economic perspectives in long term aren’t good in order to stay in the country. In Mexico it is regrettable that only between the 15% and 20 % of the remittances end up in productive activities through investments in small business, and the educational sector, while the rest is assigned to consumption. When considering that on short term there won’t be changes in the United States migratory politics, to stop the manpower flight, I think there is a real and pragmatic necessity to elaborate a strategy in order to take advantage of a better use of the dollars sent to our countries.

For example, in a conference where the topic was about capital flows for social purposes, I had the opportunity to see that in Mexico, the government is trying to develop programs in order to focus the remittances towards social work. The Program “3x1” that the Mexican authorities carry out, consider investments in schools, hospitals, sport parks, etc. where immigrants cooperate with one dollar and the different government levels in Mexico give another 3 dollars. Although this is an original idea in which the cooperation of the immigrants, the federal and local governments converge, it is necessary to be careful in involving the public sector in an open way, in an event that occurs easily already in the private sector. In other words, it would be immoral that a Government would pretend to do any management with the immigrant’s money.

In many cases the immigrant keeps resentment feelings towards the central government, because in spite of not having given great benefits as a citizen, the Estate interfered in almost all the aspects of their daily chore. These feelings possibly will have a negative influence when the time comes to make approaches in order to channel the flows or information as an intermediate. Therefore, I consider that the steps that will be carried out, must be directed in giving incentives to any money that comes for social or productive purposes, and that there exist tributary or any other type of benefits towards the consignees. This won’t only improve the level of life of the citizen that lives in Ecuador, but it will promote that the flows towards the country don’t be used only to cover the basic needs, but for investment activities also.

To conclude, I consider that what has to be done in countries as Mexico or Ecuador, is to work with the local authorities, the private sector, foundations, financing institutions and NGOs, in order to find the way that the remittances flow, do a better job, helping in the development of the local economies in an optional and clever route.

* President of FIE in Mexico
** It was published by MiPYMES Magazine, July – August 2005.