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October 1, 2008

Money sent home by Mexicans in US drops 12 percent

MEXICO CITY — Mexicans living in the U.S. sent home 12 percent less money in August, the largest drop on record since the Bank of Mexico began tracking remittances 12 years ago, the central bank reported on Wednesday.

After years of record gains, remittances have dropped across Latin America. In Brazil, immigration to the U.S. dropped dramatically after the real rose in value against the dollar.

In Mexico, Mexicans began sending less money home this year, economically stranding many small towns and neighborhoods that live off the stipends. The Bank of Mexico said remittances will likely continue to fall in the coming months because of the “difficult problems the U.S. economy faces.”

The bank said remittances in August dropped 12 percent to US$1.9 billion. That compares to US$2.2 billion in August 2007.

Migrants living in the U.S. have sent home US$15.5 billion in the first eight months of this year, 4 percent less than the same period the year before.

A slowing U.S. economy and stepped up immigration enforcement by the U.S. government, including record deportations and increased border security, are behind the drop.

Remittances are Mexico’s second-largest source of foreign income, next to oil exports.

Nearly all of it comes from the United States, home to 98 percent of Mexicans living abroad. At least 11 million Mexicans live in the United States.

Mexico’s economy has largely weathered the global economic crisis, buoyed by a national housing boom and government-funded infrastructure programs.

But Treasury Secretary Agustin Carstens said this week that Mexico will still be hit by the global crisis, as tourism drops and continued volatility deflates oil and other commodity prices. He has lowered his annual growth forecast for Mexico to 2.5 percent.

Mexico’s IPC stock index rebounded Tuesday, then slipped 1.5 percent on Wednesday, evidence that the U.S. crisis is still rattling markets here.

President Felipe Calderon has boasted that Mexico is no longer economically dependent on its powerful northern neighbor, arguing against the old adage: “If the U.S. economy catches a cold, Mexico gets pneumonia.”

But George Grayson, a Mexico expert at the College of William & Mary in Virginia, said there is no way Mexico can escape being hit hard by the U.S. crisis, which comes as the country struggles with rising drug and street violence and falling oil production.

“I think Calderon is sort of like a deer caught in the headlights of four onrushing tractor trailers,” he said.

While illegal immigration to the U.S. has fallen off recently, he predicted that many Mexicans would again turn to the U.S. as the Mexican economy weakens.

“It’s going to mean an outpouring of illegal immigrants to the U.S.,” he said.

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