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The truth about remittances

Claim:

Remittances are good for both countries

Summary:

They have a hugely negative impact on both countries

"Remittances" refers to the money that foreign workers send to their home countries. In the U.S., some of those workers are here legally, but many are not.

Some people claim that remittances are a positive force. The opposite is true.

In brief, people become an export for the country that receives the remittances. In many cases, those countries are then incentivized to send us more people. And, in some cases those people are worth more as exports than if they stayed at home. That leads to more illegal immigration. In the case of Mexico, it leads to them printing things such as a comic book (or the cancelled maps) showing how to cross the border illegally.

It also encourages political corruption in the U.S. American companies profit from sending remittances to Mexico and other countries. Since a good portion of that money is coming from nationals who are living here illegally, working here illegally, and most likely using illegal documentation those companies are profiting from illegal activity.

Then, some of those companies donate to politicians who support illegal immigration. In effect, those politicians are being paid to look the other way. That is political corruption, pure and simple.

Remittances also have a negative impact on the sending countries. For instance, half of the population of the Mexican state of Zacatecas lives in the U.S. Obviously, that deprives that state of the population it needs to build its own industries and small businesses. It also takes the pressure off the Mexican government to reform. The U.S. serves as a safety valve, allowing that country's corrupt government to indefinitely hold off on reform.

See also:

  • 1998's "Migrant Remittances to Latin America: Reviewing the Literature"
  • This 2003 OAS report.
  • U.S. Ambassador to Mexico Tony Garza (BBC): "reliance on remittances from the US is not a viable economic policy because this only increases dependence on the US and delays Mexico's full participation in the global economy"
  • "Migration of working-age people has devastated many Mexican villages": ...Avila is a part of the immigration debate that neither Mexican political leaders nor cheap-labor advocates in the United States like to talk about: 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.

Citations:

Will Wilkinson
Publication date: 2005-1-14T00:00:00
Source's job title: policy analyst
Source's organization: Cato Institute
Publication name: Reason Magazine
Quote:

Unlike aid from governments and multilateral agencies like the World Bank, remittances are not squandered by bureaucracy and are not channeled through often corrupt governments, which routinely use money intended to buy milk to buy missiles. Instead, remitted money goes straight to common people on the ground, the people who need it and for whom it is intended. [goes on to propose bringing tsunami victims to U.S. as "guest" workers...]

Alex Tabarrok
Publication date: 2008-01-01T00:00:00
Source's job title: economist
Source's organization: "in cooperation with the Independent Institute"
Publication name: Marginal Revolution
Quote:

The American dream is a reality for many immigrants who not only increase their own living standards but who also send billions of dollars of their money back to their families in their home countries - a form of truly effective foreign aid.

Dan Griswold
Publication date: 2003-10-23T00:00:00
Source's job title: associate director of the Cato Institute's Center for Trade Policy Studies
Source's organization: Cato Institute
Publication name: PBS
Additional: Ben Wattenburg of Think Tank
Quote:

WATTENBERG: ...you have this - I mean, a win-win situation in the remittances uh, thing where - where - where people come to the United States and send some money back home. It's not corrupt, it's not skimmed off, and it's not sent to Swiss banks...
[DAN GRISWOLD OF THE CATO INSTITUTE]: The best kind of foreign aid there is.
WATTENBERG: But it is the best kind of foreign aid there is. I agree with that.
GRISWOLD: ...Mexico remittances are now their number three foreign exchange earner behind oil and tourism. And it's the best kinda foreign aid. It goes directly to families and to community projects. This is something - a very important component of immigration that we shouldn't overlook...