Laws: January, 2003 - Number #3

The Mexican government has turned a novel written by Enrique Romero Moreno, a former protection officer at the Mexican Consulate in Los Angeles, into a radio drama that aims to give migrants an unvarnished view of the hardships of life in the US. The series, which discusses worker rights, health issues, and the importance of carrying documentation in the US, is airing in both Mexico and the US.

Agriculture. About 25 percent of Mexicans live in rural areas, but agriculture generates less than five percent of Mexican GDP. Poverty is concentrated in the Mexican countryside, and there are projections that the Nafta-induced elimination of tariffs on most farm commodities on January 1, 2003 would increase rural poverty and Mexico-US migration.

Mexican agriculture has been in a cost-price squeeze for a decade, as an end to government subsidies and freer trade in farm commodities that began in the late 1980s made it more difficult for many small producers to continue farming. On January 1, 2003, tariffs on all farm commodities except corn, sugar, and dairy products ended, and many Mexican pork and chicken producers announced plans to go out of business. The US ran an agricultural trade surplus with Mexico in the 1990s, and an agricultural trade deficit with Canada.

Opposition political parties teamed up with farmers' groups to protest free trade in farm products, blocking roads and border crossings, and on December 10, 2002 sent protestors on horseback into the Mexican Congress. To keep protestors from blocking ports of entry, the Mexican government promised to negotiate more assistance to farmers, who currently receive an average of $700 a year, in a new Countryside Accord by January 20, 2003.

The Mexican Hog Farmers Association said that a third of the 18,000 Mexican pig farmers had already gone out of business as US pork imports rose to 40 percent of Mexican pork consumption- US pork production costs are far lower. Armando Paredes Arroyo, president of the National Agriculture Commission, predicts that 700,000 of the six to eight million people employed in agriculture will be displaced in 2003.

In 1994, Mexico exported farm commodities worth $2.7 billion and imported farm commodities worth $3.6 billion; in 2001, Mexican farm exports were $5.3 billion and imports were $7.4 billion. Some optimists hoped that Nafta would allow Mexican corn farmers to become fruit and vegetable farmers, but the lack of credit, infrastructure, and knowledge to grow export-quality produce means that most small Mexican farmers eventually give up farming rather than switch crops.

Remittances. In 2000, a class-action suit charging that Western Union and another subsidiary of First Data Corp, Orlandi Valuta, as well as MoneyGram, did not disclose the full cost of sending remittances to Mexico was settled with an agreement to provide those who used these companies to transfer funds between 1987 and 1999 with discount coupons for future remittance transfers. The companies agreed to provide $375 million in coupons, including two $4.25-coupons or one $6-coupon for each transaction between 1993 and 1999, and another coupon for every 10 transactions conducted before 1993.

It is expected that many of the coupons, which must be claimed by March 17, 2003, will not be redeemed.

When the suit was filed, the usual cost of sending $300 to Mexico was $30 plus a foreign exchange mark up- the difference between the exchange rate used to convert dollars to pesos and the bank rate- that ordinarily added $5 to $10 to the cost of transferring money. The suit charged that this foreign exchange mark up was not disclosed to those sending money. Lawyers for migrants who sued received $10 million, and the money transfer companies contributed $4.6 million to organizations serving Hispanics in the United States as part of the settlement.

The migrants making transfers are not the only US residents who do not use banks. About 13 percent of Americans do not have bank accounts- -"unbanked" in banking parlance.

Mexican officials have mounted educational efforts to make migrants aware of the full cost of remitting money, and increased competition among money transfer firms has led to falling costs- currently about $16 for a $300 transfer -an $11 fee, plus a $5 foreign exchange mark up. There are many money transfer companies in the US-Mexico market, and banks such as Bank of America, which charges $10 per transfer, are expected to have a hard time competing with established companies that charge more, but also have more storefront agents in the US and Mexico.

In a bid to expand its marketing to 36 million US Hispanic residents, including 21 million Mexican-Americans, Bank of America took a 25 percent stake in Grupo Financiero Santander Serfin, Mexico's third-biggest bank. Only 25 percent of Mexicans have a bank account, and with remittances to Mexico expected to hit $10 billion in 2002, many foreign banks want to use low-cost remittance transfers as a way to build loan relationships with customers in both the US and Mexico.

Bank of America divided Hispanic immigrants in the US into three groups: 1.7 million people who have been in the United States more for than a decade and who have bank accounts, 11 million people who have been in the country for five to 10 years and need more banking services, and 3.4 million who have been in the United States less than five years and are unlikely to have a bank account or a credit history.

Mexico's 43 US consulates have also begun to issue matricula consular ID cards so that migrants in the US can open bank accounts with government-issued identification, which has become necessary in many US transactions. As of December 2002, 13 states, hundreds of police departments, and airlines, banks, and other private firms accepted matricula consular ID cards as government-issued identification. However, New York state and New York City have refused to accept the matricula consular as an ID card.

Mexico is developing banking institutions for more of its citizens. Elektra, a chain of 815 household goods stores, sells refrigerators and other consumer durables on credit to four million past and current customers. It has started Banco Azteca to serve what it says are 73 million Mexicans living in households with incomes of $250 to $4,000 a month, or $3,000 to $48,000 a year. In November-December 2002, some 250,000 savings accounts were opened at Banco Azteca, which is located inside Elektra stores. Elektra is often the agent for money transfer companies, drawing customers as Mexicans visit to obtain remittances.

There are about 750,000 marriages a year in Mexico, and the government has set a goal of building 750,000 new houses a year. The mortgage market is developing rapidly, and the federal government's mortgage bank, Fovi, acts like the US Fannie Mae in purchasing mortgages issued by mortgage lenders known as sofoles.

Social Security. The Mexican government is seeking a "totalization" Social Security agreement with the US, so that workers employed in both the US and Mexico can "totalize" the number of years they have worked in both countries to meet the minimum years required to qualify for benefits in the Mexican or US social security system. For example, a Mexican employed six years in the US and four in Mexico could combine these periods of employment to qualify for US Social Security benefits, which require 10 years of employment.

Until now, the cost of totalization agreements has been relatively small, since they have been almost exclusively with European countries. The current 20 agreements cover 94,022 persons abroad at a cost to the US of $184 million a year; recipients abroad receive an average $163 a month. If a totalization agreement is reached with Mexico, an estimated 162,000 Mexicans could obtain Social Security benefits in the first five years of an agreement. Mexico would also like the US to allow workers employed under false Social Security numbers to obtain credit for their US earnings. Over $21 billion in Social Security payments have not been tracked to potential beneficiaries, most likely because they were paid under a false Social Security number.

Crime. Dealing with Mexicans who commit crimes in the US has long been difficult. The US deported 150,000 Mexicans in FY00, including 56,000 criminals. Mexicans are 80-85 percent of all foreigners deported. Most are returned to Mexico by bus. However, some Mexicans commit crimes in the US and flee to Mexico. When the US seeks their extradition, Mexican suspects often challenge their extradition on the grounds that they face the death penalty, which does not exist in Mexico.

Until 1996, the Mexican government did not extradite any of its nationals. Beginning in 1996, Mexico began to extradite those wanted for committing crimes in the US, often after US prosecutors agreed not to seek the death penalty, but the number of Mexicans extradited was two or three a year in the late 1990s. The number rose to six in 2001, when the Mexican Supreme Court placed restrictions on extraditing Mexicans who face life imprisonment in the US, an alternative to the death penalty. In FY00, there were almost 4,000 open extradition requests.

Unions. The union representing the 117,000 workers employed by Petroleos Mexicanos is the most powerful in Mexico, and union leaders, traditionally associated with the PRI party, are local power brokers (caciques) who pass out favors to friends and punish enemies, and are protected by a system that thrived during 70 years of PRI power. Local unions receive member dues as well as profits from union-owned businesses, and there is little regulation or accounting required of unions to their members.

Carol J. Williams, "Farmers in Mexico Fear End of Tariffs," Los Angeles Times, January 1, 2003. Anna Gorman, "Radio Offers Grim Drama on El Norte," Los Angeles Times, December 26, 2002. Ginger Thompson, "Nafta to Open Foodgates, Engulfing Rural Mexico," New York Times, December 19, 2002. J.M. Kalil, "Special Report: Running For The Border," Las Vegas Review-Journal, December 15, 2002. www.reviewjournal.com/lvrj_home/2002/Dec-15-Sun-2002/news/20283915.html