Exploiting remittances: good for Mexico’s development?

More and more money is being sent back home by economic migrants and so the interest in how remittances can help fight poverty is growing. The total value of remittances world wide is estimated at over 100 billion US dollars per year. In 2001 Mexico became the nation with the largest share of remittances as its workers sent home 9,920 million US dollars.

Research from York University in Canada proposes a broader understanding of migrant remittances. Using data from Mexico the author argues the importance of non-economic dimensions of remittances particularly its social and political implications, the differences between family and community-based (or collective remittances) and the difficulties in channelling them towards savings and investment.

Mexican migrants are forming clubs and hometown associations in the countries they migrate to. These associations try to attract funds for community projects and to gain negotiating power with politicians in Mexico. They are important as they indicate social organisation and could encourage investment in Mexico. Community projects funded by collective remittances have taken place in many rural areas with high rates of migration to the United States. Projects are carried out under various arrangements by local committees affiliated with the hometown associations, municipal planning departments, local contractors and others.

Key findings include:

• Collective remittances fund basic infrastructure and communications projects, public service infrastructure, recreation and other community projects.
• Community projects funded by collective remittances aim to meet the gap in public services but some face problems themselves, including poor planning, quality, corruption, poor maintenance and money running out.
• Groups that run the community projects may operate autonomously or with one or more levels of government.
• Working with the government on cost-sharing programmes means that migrant organisations have to get involved with federal regulations - generally an important political and organisational learning process for them.

Mexico’s federal and state authorities have developed programmes to maintain contact with Mexican migrants and work with them in partnership to channel remittances towards development. But these are only moderately successful: family remittances form the bulk of total remittances and these are used for household expenses and improving the lives of family members.

As the Mexican state calls for a more ‘productive’ use of remittances and considers sharing the cost of infrastructure and service initiatives with migrants’ associations, it is important to note that:

• migrants in certain areas may be more interested in charitable projects than profit-making ventures: policies could consider cost-sharing or incentive funds in specific regional contexts
• policies may have to vary by type of remittance: for example reduced money transfer costs would be useful for family remittances while those sending or receiving collective remittances would benefit from training and skill development
• training and technical assistance to migrant associations in the United States and to municipal planners and engineers and community organisations in Mexico would help them develop leadership and managerial skills
• the planning process for projects has to be transparent, democratic and participatory otherwise there will be conflicts between migrants and political authorities or between groups of migrants
• relevant NGOs would have to cooperate more closely with the migrant hometown associations.

Community projects can be sustainable. However, it is important to modify the planning process, strengthen participation both from migrant organisations and local communities. This is possible with the combined efforts of the Mexican government and the NGOs on both sides of the border.

Source(s):
‘Individual and Collective Remittances to Mexico: A Multi-dimensional Typology’, Development and Change, Vol.35, No. 4, by Luin Goldring, September 2004
‘Re-thinking remittances: social and political dimensions of individual and collective remittances’, Center for Research on Latin America and the Caribbean, York University, by Luin Goldring, February 2003 Full document.

id21 Research Highlight: 16 February 2005

Further Information:
Luin Goldring
York University
CERLAC, 240B York Lanes
4700 Keele Street Toronto, Ontario M3J 1P3 Canada

Tel: +1 416 736-2100 x 60311
Contact the contributor: goldring@yorku.ca

York University, Canada

Other related links:
'Remittances and development: providing funds for the poor'

'Linking microcredit and remittances – new business opportunity for MFIs?'

'The importance of remittances for Somali refugees'

'Harnessing the investment potential of migrants’ remittances: the importance of family ties'

'From Kerala to Rome: why women migrate'

'The consequences of refugee flows and managing the aftermath'

'Remittances: fuelling consumerism or aiding development?'