By Manuel Roig-Franzia
Washington Post Foreign Service
Friday, April 18, 2008
LO DE LUNA, Mexico -- The effects of the subprime mortgage crisis and the downturn in the U.S. economy have cascaded into Mexico, causing a sudden, precipitous drop in the flow of money sent home by Mexican immigrants and highlighting this country's dependence on its wealthier northern neighbor.
In January, the cash transfers, known as remittances, sagged almost 7 percent compared with a year earlier, the steepest monthly dip in at least 13 years, according to Mexican government statistics. Economists here believe the decline in remittances is already pushing thousands into extreme poverty and could lead to a significant increase in migration as desperate Mexicans, deprived of support from abroad, flee to an ever more difficult U.S. job market.
"It is a vicious, perverse circle," Juan Manuel Padilla, a demographer in the economics school at the University of Zacatecas, said in an interview. "Work opportunities here are nonexistent, so this is going to cause more migration to the United States, even though it is getting harder to find work over there."
Other parts of the region, including El Salvador and Guatemala, are bracing for similar declines, but for now they are holding steady or seeing small gains. Economists believe Central American nations are faring a bit better than Mexico because their migrants are concentrated in areas such as Washington and the Maryland suburbs, which have withstood the foreclosure crisis better than places such as Los Angeles and California's San Joaquin Valley, both of which have long been major destinations for Mexican migrants.
The drop-off in remittances to Mexico, which economists believe could accelerate this summer if the U.S. economy continues to falter, is swelling into a catastrophe here in the central Mexican state of Zacatecas, which has Mexico's highest migration rate. Hit with particular ferocity are small villages that have been virtually abandoned by all but the elderly parents of migrants. In the Zacatecan village of Lo de Luna, a collection of crudely built brick homes six miles from the nearest paved road, seniors such asErnesto Hernández have been left nearly destitute.
Hernández, 80, doesn't take his diabetes medicine anymore. It costs too much, and he'd rather buy food than pills.
Ever since his son, Alfonso, lost his home in the United States to foreclosure a few months ago and stopped sending money for medicine and farm supplies, life has been "a disaster, a total disaster," Hernández said.
Buoyed by increased migration and lower money-transfer costs, remittances to Mexico peaked last year at just under $24 billion, more than 5 1/2 times the amount sent a decade earlier. Remittances recently vaulted over tourism to become the second-largest source of foreign currency in Mexico, topped only by oil exports.
The money has transformed the landscape of many small towns, paying for new houses and new kitchens, cars and childcare, medical care and clothes. But some economists also say the giant sums sent to Mexico have created a sense of complacency, especially among government officials who have failed to right the country's wobbly economy.
"This is demonstrating that there is an increased dependence on remittances and a great vulnerability for the country," said Rodolfo García Zamora, an economics professor at the University of Zacatecas and one of Mexico's leading authorities on remittances. "Neither the government nor the families who are affected have a good alternative to remittances."
President Felipe Calderón, who began his term in December 2006 promising to be "the employment president," boasted recently that 800,000 new jobs were created during his first year in office. Still, an estimated 400,000 to 650,000 Mexicans -- three-quarters of whom are undocumented -- cross the border each year to look for work in the United States, according to Mexican government estimates.
Many who migrate to the United States buy homes in Mexico, hoping to retire in their native country. But there is growing evidence that economic problems are forcing migrants now living in the United States to sell their Mexican homes after being laid off or losing their U.S. homes to foreclosure. At least 149 properties in the historic district of Jerez de García Salinas, a retail town in Zacatecas state, have gone on the market at fire-sale prices in the past few months, said Encarnacion Buñuelos, a businessman and consultant to the city government. The owners, mostly migrants, "will stay in the United States for sure; they're never coming back," he said.
The profile of Mexican migrants to the United States has changed dramatically in the past four decades. Today it is common for entire families to cross the border looking for work. Women -- who made up only 10 percent of migrants in the 1970s -- currently account for about half of the migrant population, according to the World Bank.
The exodus of whole families has emptied small towns. The populations decreased in 54 of 58 Zacatecas municipalities between 2000 and 2005, according to University of Zacatecas statistics. More Zacatecans live in the Los Angeles area, one of the flash points in the subprime mortgage breakdown, than in the city of Zacatecas, which has a population of 122,000. About 1.8 million Zacatecans and their descendants live in the United States, compared with 1.4 million still in Mexico.
Approximately 300 schools have closed here since the 1970s, Padilla said. Frequently, the only family members left behind are the elderly and infirm.
At the entrance to Ermita de Guadalupe, a village of 2,000 in Zacatecas state with perpetually empty streets, the old men linger on park benches, leaning on canes and worrying about their children's problems in the United States. Carlos Trujillo Landeros, 76, could once count on several hundred dollars a month being sent to him from three grandsons -- two are garbage collectors in Las Vegas and the third is a laborer in Sacramento.
But one of "the boys," as Trujillo calls them, lost his home to foreclosure, and they have all had their work hours cut back. Now, the money trickles in. Instead of getting $400 or $500 a month, Trujillo gets as little as $50.
Trujillo -- a former migrant who lost the use of his right leg because of an infection he developed while picking oranges in California in the 1960s -- can't keep up with his medical bills. His adult daughter, who is mentally disabled, requires hundreds of dollars a month in medicine, his wife just underwent an expensive stomach operation, and Trujillo takes medication for high blood pressure.
Like many elderly here, he was forced to seek help from a growing underground network of illegal loan sharks who feed off the desperation of migrants' families. Trujillo is now $8,000 in debt and can barely make the 15 percent interest payments, he said.
"I owe here, I owe there," he said. "I owe everywhere."
On the highway to Ermita de Guadalupe, a dirt road cuts through miles of nopal cactuses and ends at Lo de Luna, a village with a population of 130. Ernesto Hernández tries to work his 17-acre plot, which he received a quarter-century ago as part of a measure that granted farmland to Mexican peasants. But he tires more quickly with each passing year.
In his day, Hernández made several trips to the United States, picking tomatoes and beets in the long-defunct bracero guest-worker program. He made a few dollars, but never enough to do more than get by. Still, he understood when his son, Alfonso, announced that he was going to the United States "for a little while."
That was 23 years ago. Since then, Alfonso has returned only for short visits.
"What else was he going to do?" Hernández said. "There's nothing here."
Alfonso was faithfully sending home $100 a month until late last year, when he lost his home in a Los Angeles suburb to foreclosure, his father said. Now no money comes. The sons of at least three of Hernández's elderly neighbors have also lost their homes, their jobs or both, he said. The river of money from the United States that sustained this village is now drier than the desert that surrounds it.
But the horror stories of lost jobs and foreclosed homes have done nothing to dissuade the few working-age men remaining in Lo de Luna. A few nights ago, Hernández and other villagers said, five men left Lo de Luna in hopes of sneaking into the United States.