Immigration News: October, 2004 - Volume 11

Mexico: Social Security, Migration, Economy

President Vicente Fox provided an upbeat picture of economic improvement in the annual state-of-the-nation address (informe) on September 1, 2004. However, the Mexican economy has grown only 1.4 percent a year in Fox's time in office, and Mexico-US migration increased. Fox said that his government would increase investment in road infrastructure, the petroleum industry, and education, and continue to press the United States for a comprehensive deal to legalize the status of millions of undocumented Mexican immigrants.

The Christian Science Monitor reported that the exit of perhaps a million Mexicans a year for the US is affecting internal migration patterns, drawing indigenous peoples from the south to fill in for those who left central and northern Mexico. An estimated 50 percent of those born in Zacatecas are in the US, the highest per capita emigration rate in Mexico, and local farmers are recruiting migrants to pick their bean, onion, garlic, tomato, and chile crops at wages of about 100 pesos ($9) a day, twice the minimum wage.

Some of the internal migrants settle, and the Huichol Indians who settled in Zacatecas have been accused of crimes such as theft and assault. There are also complaints that recruiters offer workers housing, food, free transport, and wages above anything they can find back home, and then fail to keep some of their promises.

Federal, state, and local governments match the remittance savings sent back to Zacatecas by hometown associations in the US, and $20 million was spent on 308 three-for-one projects, including bridges, paved roads and providing drinking water. One assessment concluded that three-for-one projects have improved the quality of life but not stimulated the Zacatecan economy.

Social Security. Workers at Mexico's Social Security Institute (IMSS), the government agency that administers social security and the public health service, protested plans to curb their pension benefits. IMSS has 370,000 unionized employees and 120,000 retirees, and IMSS doctors, nurses and administrative workers can retire after 27-28 years of work at age 52, often receiving more than 100 percent of their highest earnings.

Government pensions in Mexico and Latin America are very generous, and with falling fertility, it will be harder to provide the full salary pension benefits promised to government employees. Mexico in 1997 forced all private-sector employees to put 6.5 percent of their salaries into personal 401(k)-style accounts, so that by June 2004, some $35 billion was in 30 million accounts. The protests are against efforts to require government workers, who are about a seventh of workers in Mexico, to do the same.

The US has 20 social security totalization pacts with countries such as United Kingdom, South Korea and Chile that allow foreign workers to combine ('totalize') their work credits from the countries in which they worked and draw a higher pension in one country. The US is negotiating a totalization agreement with Mexico, but critics say that a Mexican-US agreement would be lopsided because there are 3,000 Americans working in Mexico and perhaps seven million Mexicans working in the US. At least half of the Mexicans in the US are unauthorized, and critics say that many might be tempted to stay for 10 years or 40 quarters so that they qualify for benefits; if these unauthorized workers are later legalized, they will be able to [PLM1]get US Social Security benefits. The GAO in 2003 warned that a totalization agreement would create an additional incentive for unauthorized workers to enter the U.S

Some 10,000 people land in Mexico City's airport every day, and they include non-Mexicans being smuggled to the US. In the first seven months of 2004, Mexico City airport authorities detained 112,000 illegal migrants, compared with 150,000 in all of 2003. Most are from Central and South America, but there are also Chinese and Eastern Europeans who say that it is cheaper to get into the US via Mexico than to be smuggled directly to the US.

Mexico has had one of the world's fastest fertility declines. The average woman had 6.8 children in the late 1960s, compared to 2.8 today. In 1985, five percent of Mexico's population was over the age of 60, but 15 percent are expected to be over 60 by 2025.

Mexican consulates in the US continue to issue matricula consular cards to mostly unauthorized Mexicans in the US for a fee of $26; the cards are used to open bank accounts, board airplanes, and serve as government-issued IDs. As mobile units travel around the US issuing matriculas, bank and real estate firms offer to open accounts and provide information to those getting matriculas on buying a home.

Economy. Mexico's border-area factories known as maquiladoras are expanding with the US recovery; the term maquiladora is derived from an old Spanish colonial term for the fee paid to a miller to grind grain into flour. After reaching a low in March 2002, maquiladora employment is once again climbing past 1.1 million, as the factories that did not move to China, including auto and medical factories, resume an expansion that was slowed by the US recession.

There are about 2,800 maquiladoras, including 75 percent in Mexico's six northern border states, and they pay an average $1.50 an hour to workers, many of whom are women with their first jobs. Mexico hopes that maquiladoras will continue to reflect its major competitive advantage, proximity to the US rather than low wages, and is crediting maquiladora expansion for expected four percent economic growth in 2004. However, high energy costs, tattered infrastructure, red tape, crime and corruption are encouraging some investors to move from Mexico to Asia.

In some of the new and remodeled maquiladoras, labor costs are less than 15 percent of production costs, and more than a third of the workers have at least some technical training. A production line leader with six years experience reported earning $130 a week, which is enough to buy a $25,000 two-bedroom house. Production line workers earn half as much, $50 to $60 a week.

Volkswagen workers in Puebla ended a short strike in August 2004, agreeing to return to work with a wage increase of 4.5 percent. Volkswagen workers earn an average $26 a day, about seven times the local minimum wage.

Remittances reached $7.9 billion in the first six months of 2004, an average $1.3 billion a month, suggesting that they may top 2003's total of $13.4 billion. The average transaction is $400, and the cost of remitting (amount paid plus exchange rate differential). Western Union reported that the number of transfers it handled rose by 20 percent in 2003 despite increased competition.

"Opening Mexico," by two former Mexico correspondents of the New York Times, traces the decline and fall of the Institutional Revolutionary Party, the PRI, ousted in July 2000 by President Vicente Fox.

Ken Bensinger, "Mexico's other migrant wave," Christian Science Monitor, October 8, 2004. Marla Dickerson, " Border Factories Up and Humming," Los Angeles Times, October 3, 2004. Elisabeth Malkin, "A Boom Along Mexico's Border," New York Times, August 26, 2004. Preston, Julia and Samuel Dillon. Opening Mexico: The Making of a Democracy. 2004. Farrar, Straus and Giroux.