Unemployment is already high in Mexico. It could be even higher if Mexican workers in the U.S. went back. Photo: Aneas (flickr)

Mexican workers often come to the United States to earn money and send it to their relatives back home. But NPR reports that as the U.S. economy has gotten worse, some of these worker's families are sending them money from Mexico.

It's a phenomenon that could have a positive economic impact: These reverse remittances, as they're called, allow the migrants to keep searching for higher-paying work than they could get in Mexico, explains an NPR report. These reverse remittances may also prevent a flood of returnees from further devastating Mexico's economy and increasing unemployment.

When the U.S. economy rebounds, these workers are well-positioned to start sending remittances back to their families again.
These remittances play a big roll in Mexico's economy — they're the country's second-largest source of foreign income.

Still, the total dollar amount of reverse remittances remains small in comparison to the traditional southward flow of cash and there is no reliable data about its overall volume, points out a World Bank report.

As one Mexican father of a migrant worker told the New York Times, “We have an obligation to help them [until they find work again]. They’re our sons. It doesn’t matter if they are here or there."

The interior of a number 2 subway train in NYC. Photo: Kevin H. (flickr)

Jeton Qallaku, a Bronx resident, sends about three percent of his $60,000 salary back to his parents and sister in Kosovo each year. Qallaku's family mostly uses these remittance payments to keep up with their water, sewage, and electricity bills.

Jeton immigrated to New York from Kosovo in 1996, and has been sending money home ever since. Kosovo is one of the most remittance-dependent countries in the world. In 2008, remittances from Kosovar Albanian migrants accounted for 13 percent of the country's economy, according to World Bank figures. In that same year, global remittances totaled $308 million, a record high. But in the past year and a half, remittances have taken a hit as the world reels from the economic crisis.

Jounalism students at Columbia University teamed up with GlobalPost.com to profile New York area migrants to learn how the economic crisis is affecting their capacity to send money home. The students captured stories from migrants while traveling along New York's #2 subway line, which connects Brooklyn to the Bronx. Jeton's story is one of many included in this project, entitled "Payback: Remittances in New York City," but the project also features stories of migrants from Ghana, Haiti, Kosovo Albania, Mexico, Yemen, Pakistan and China. These very personal stories are told through video content and interactive maps.

Like many young people who dream of coming to the wealthy Gulf States to find work, 27-year-old Anesu Gamba came here to Dubai three years ago to escape Zimbabwe’s crippling poverty.

I met Anesu, a soft-spoken man with a round face, at the Department for Naturalization and Residency in Dubai. He went there to cancel the visit visa he requested for his brother because he could no longer afford the ticket. “I wanted him to come and enjoy Dubai, he was so excited,” Anesu said, gazing sadly at the ground.

In the beginning, his new life in the Gulf was just as he had imagined. “In the first two years, I lived in a dream, I had friends, and I bought a car," said Anesu. He was also able to send money to his mother, father and younger brother in Zimbabwe, none of whom have jobs.

But last month, Anesu didn't send his family any money. He was among several laid off by the small public-relations company that hired him as a graphic designer. The company blamed the downsizing on the global economic downturn.

About a quarter of Zimbabwe's population has gone abroad, and together they send home anywhere from $360 million to $1 billion in remittances, reports the UN news agency, IRIN. These remittances are often credited for saving the country from complete collapse.

But the burden of supporting family members abroad is heavy for those in the Gulf. Many, like Anesu, have cut other costs to keep up the remittances. Anesu sold his car and moved into a shared apartment with three other migrants. “Sending money home is not an option, it’s an obligation," he told me. "I just can’t let my family down."

Finding a new job in Dubai isn't easy these days, but returning to Zimbabwe isn't very tempting. Less than 6 percent of people living in Zimbabwe are employed, the UN said recently. At its peak last year, inflation reached 231 million percent and Save the Children reports that more than 75 percent of the population lives in abject poverty.

Anesu thinks his chances of finding a job are better in Dubai. "I have one month to find a job after the cancellation of my visa," he said. "I came to Dubai with hopes and dreams. I will try my best to find a job, even as a waiter, a dishwasher, I don’t care. At the end, I don’t have many options, do I?"

Earlier this month, Obama began taking the first small yet significant steps to implementing a different relationship with the island by signing new measures into law. These new measures will allow Cuban-Americans to send more money to family members and travel more freely between the U.S. and Cuba.

Since 2004, travel to Cuba under the Bush administration was limited to once every three years for Cuban-Americans, with visits limited to only nuclear family and no longer than 14 days. Remittances were also only allowed to be sent to nuclear family and limited to $300 every three months.

In contrast, the new measures under Obama remove all restrictions on the amount and frequency of remittances and travel to the island. The changes also make it easier for telecommunications companies to do business in Cuba, which would allow quicker and easier access to the Internet for Cubans.

Cuba has been receptive to these changes. Raúl Castro has unexpectedly and publicly declared that Cuba is ready to "discuss everything" with the U.S. There are still no official plans for future talks between the two countries. Until then, the question remains of whether or not these measures will help to significantly alleviate poverty in Cuba and improve people's standard of living.

In Cuba, the mood among citizens ranges from cautiously optimistic to skeptical. An article in the St. Louis Post Dispatch profiles Cuban citizens like Ivan, a computer programmer, who expresses hope that Obama will bring about a much needed change. "Obama, to Cuban people, is our, how do you say, our hope," Ivan says. "We believe he wants to lift restrictions on Cuba. To Cubans, he is a very good presidente."

For the most part, the Cuban-American community has reacted with enthusiasm to the new measures. The Cuban American National Foundation, the leading organization for Cuban exiles in Miami, has expressed its support for a new course in U.S.-Cuba policy, calling for "a break from the past" that would "chart a new direction."

In Little Havana, a strongly Cuban neighborhood in Miami, residents seemed to welcome change in U.S.-Cuba relations. "It is stupid to have no relationship with Cuba," said a middle-aged man, identifying himself only as Alex. "It didn't work for 50 years... The way the system will change is by having a relationship."

In a country where the average salary is $20 a month, the ability to receive money from relatives abroad is likely to become an economic lifeline for thousands of people. However, with U.S. economic sanctions still in place, BBC correspondent Michael Voss thinks the remittances will have little effect:

It will give more spending power, it will allow people to buy mobile phones, possibly, you know, have a slightly better standard of living. But in terms of kick-starting the economy, I don’t think we’re going to see that at all.

Nevertheless, with Cuba's poverty level as one of the lowest in the developing world, even small improvements could make a noticeable difference. With the Obama administration now planning informal meetings with Cuban diplomats, hopefully any future change in U.S.-Cuban policy will make the Cuban people its central focus.

Tajik women take on the bulk of responsibility while husbands and sons have left the country for migrant work. Photo: Thatcher Cook for Mercy Corps

Tajikistan has the highest remittance rate in the world — a recent World Bank report says that around half of the Central Asian country's money comes from workers abroad. But a weakened economy in Russia, where 98 percent of Tajik remittance income originates, has drastically slowed cash flow back to Tajikistan and its seven million inhabitants.

EurasiaNet reports that between September and November of last year, remittances from migrants dropped more than 50 percent. That decrease alone accounts for a 20 percent drop in the Tajik GDP.

Nearly one million Tajik men work abroad. These workers face growing tensions as local workers fight to keep their own jobs, feeling threatened by the guest workers who poured into Russia and Kazakhstan during better economic times in those countries. The New York Times says that during the migrant boom, the portion of Tajiks living below the poverty line dropped by one-third, to around 50 percent.

At home, Tajik women are left to manage the fields and young boys are the primary wage earners. Remittances help keep Tajik families out of extreme poverty, reports EurasiaNet's Rob Cavese, but because most transactions are cash-based and few Tajiks have bank accounts, the concern is that most funds from abroad are used for immediate consumption and not for investment.

With so many in Tajikistan relying on outside wages, Cavese writes, there is little incentive for the government to initiate a restructuring of domestic wages.

“The Tajik economy is not sustainable without migration,” Dilip Ratha, a senior economist at the World Bank, told The New York Times. “It is not diversified. People are the most important resource they have.”

The U.S. financial crisis is affecting its southern neighbor. Photo: Allen Ormond (flickr)

As Americans grapple with plunging retirement savings, declining home values and rising gas prices, our neighbors to the south are suffering, too.

A decline in both exports — most of which go to the U.S. — and remittances are putting the brakes on the Mexican economy.

Mexican manufacturers rely heavily on U.S. consumers; Americans buy more than 80 percent of the country's exported goods. But as American consumers cut back, Mexican manufacturers are laying off workers. The Arizona Republic ran a story quoting one factory manager who cut nearly half his staff after sales dropped 40 percent.

The slowdown in the manufacturing sector has a trickle-down effect. In Nuevo Laredo, taco vendor Jorge Flores has lost 40 percent of his business in recent weeks due to the economic hard times.

Also hurting the Mexican economy is the decline in money sent back to Mexico from Mexicans living in the U.S., also known as remittances.

One in four families in Mexico relies on remittances as its primary source of income. And remittances have dropped by 12 percent in the past 12 months.

Fewer visits to Western Union are partly due to a fall in U.S. home construction, an industry staffed heavily by Mexican laborers. One day labor center in Los Angeles, for example, says there's been a drastic drop in demand for workers.

Help is on the way, according to Mexican President Felipe Calderon: Yesterday Calderon proposed a 65.1 billion pesos ($5.26 billion) stimulus package to shore up the flagging economy.

Photo: Geoff Oliver Bugbee for Mercy Corps

A recent survey by the Inter-American Development Bank found that over the past two years, the number of Latino immigrants sending money home from the U.S. has dropped by more than 20 percent.

Though the amount of money transferred from the U.S. to Latin America has increased by about 1 percent to $45.9 billion, the Bank estimates that more than three million Latin American workers no longer send remittances to their home countries. Higher prices, fewer low-paying jobs, and a crackdown on illegal immigrants were cited as reasons.

The survey should be cause for concern in Latin America, where remittances have played a significant role in reducing poverty and promoting economic growth. Indeed, Professor Rafael Pampillon of Spain’s Instituto de Empresa business school notes that the total amount of remittances to Latin America is greater than the combined amount of foreign investment and development aid to the region. A May 4 editorial in the New York Times spells out the potential negative impact:

Immigrant workers are not just vital to the American economy, their money transfers are a critical bulwark against poverty for millions of people south of the border. Cutting off that lifeline will lead to more misery in some of the poorest parts of the hemisphere — and it will feed the desperation that sends more migrants to the United States.

What impact is the U.S. economic slowdown having on developing countries? Matt Homer of the World Politics Review writes that the weakening U.S. dollar is having an adverse effect on individuals in developing countries relying on remittances for large parts of their income. A bigger problem, however, is that the negative impact of the declining dollar is likely to go beyond the individual level. For a number of developing countries, remittances make up a significant percentage of total GDP, and several countries are already expressing concern that a decrease in remittances could hurt their entire economies.

In Tonga, for example, remittances account for just over 32 percent of the country’s total GDP. Yet because up to 80 percent of all remittances come from sources in the U.S., there is concern that continued declines in the U.S. economy “will hit Tonga extremely hard.” Economists in Nicaragua are also predicting that “any decline in the amount of remittances will undoubtedly affect consumerism within the Nicaraguan economy.” While around 40 percent of Nicaraguans receive remittances, most of which come from the U.S., economists estimate that almost 90 percent of remittance money sent to the country is spent in the local consumer economy.

To some the word "immigration" evokes an image of people standing in line at Western Union, waiting to wire money home to families for groceries and clothing. It happens thousands of times each day all over the world. All those remittances — the small amounts of cash wired across borders — add up to a whopping $300 billion a year.

Dilip Ratha believes this $300-billion industry can play an important role in international development. He's a World Bank employee who is working to make it easier for migrants to transfer money and direct the cost savings towards economic development in their own countries.

Skeptics argue that if remittances equaled development, Mexico would look like Switzerland. Ratha might argue that without remittances, Mexico's economy might look a whole lot worse. His new paper suggests that Africa could add as much as $3 billion to public coffers just by reducing the costs that migrants pay to send remittances. (Currently, charges on these cross-border money transfers can be as high as 10 percent.)

Ratha hopes to prove that hundreds of billions of remittance dollars can be funneled toward poverty alleviation by making simple policy changes.

His personal story has shaped his beliefs. In the U.S., he earns a salary that is 100 times what he could have earned in his birthplace of India, and his own remittances have helped build schools and pay medical bills there.

And while the negative impacts of immigration often make headlines, Ratha stresses that there are costs of not immigrating, too — costs borne by people living in poverty and by everyone in the global economy.

While the immigration debate in the United States is largely focused on the U.S.-Mexico border, an article from National Geographic looks a bit farther to the south. An estimated 400,000 migrants from Central America cross the border into Mexico every year, and though some stay to work in Mexico, most are headed for the U.S.

The economic prosperity of the U.S. has a strong pull effect on the Latin American poor, and the money that migrant workers send home to their families is having an increasingly large impact on their national economies. In Honduras, for example, remittances sent home from the U.S. made up one-fifth of the country’s gross national income in 2006.

“There is no solution to this,” a former Chiapas state official said wearily, after ticking off a list of southern border upgrade programs that have fizzled into ineffectiveness over the past decade. “You can put all the control measures down there that you want, but it’s not going to be fixed. The solution is to eliminate poverty.”