Immigration News: July, 2005 - Volume 12

Latin America: Remittances, Cafta

Latin American nations received $46 billion of the $100 billion in remittances to developing countries in 2004, including $16.6 billion to Mexico; $5.6 billion to Brazil; $3.9 billion to Colombia; $2.7 billion to Guatemala; and $2.5 billion to El Salvador. The average remittance transfer was reported to be $328. Competition between remitters has reduced the cost of transfers to less than 10 percent of the amount sent in 2004.

A survey of migrants found that money-transfer firms such as Western Union made 78 percent of the transfers, people traveling home carried 11 percent of the remittances, and US banks had a seven percent share.

The Dominican Republic announced plans to begin issuing matricula consular cards to some of its 300,000 citizens in Puerto Rico to make it easier for Dominicans to open bank accounts and enter government buildings.

Cafta. The Central American Free Trade Agreement was reportedly in trouble in Congress, even though the US Senate approved it on a 54-45 vote in June 2005. Many Democrats who normally support freer trade opposing the agreement with five Central American countries and the Dominican Republic, citing Cafta's lack of labor protections. Republican supporters of sugar producers and much of the textile industry opposed because of potential low-cost competition. Cafta's six-member countries have 50 million residents and a GDP of $170 billion; their trade with the US totaled $33 billion in 2004. If Cafta is defeated, it would be the first time Congress rejected a major trade agreement in more than four decades.

Central American leaders want Cafta approved to expand trade with the US and thus speed development. However, the World Bank warned that Cafta alone "is unlikely to lead to substantial economic development" in source countries. Most economists agree that more trade speeds overall growth, but the benefits are not targeted toward lower-income people. Instead, freer trade can increase inequality between richer and poorer regions, as Nafta helped the already richer northern areas to grow while not transforming the poorer south.

Cafta countries have poor records of protecting worker rights, a point emphasized by US unions and those who interview workers in garment factories in Central America. Cafta countries are the poorest with which the US has ever signed a free-trade agreement. Rural-urban migrants who find jobs in the garment factories on one hand welcome the steady wages but on the other lament the long hours and high prices of housing and goods in factory zones. Efforts to organize independent unions are often crushed- only two of 200 textile factories in Guatemala have collective bargaining agreements. Cafta requires governments to enforce their labor laws, and allows fines of up to $15 million per violation paid by governments and to be spent to improve labor law compliance.

The free-trade agreement of the Americas FTAA aimed to create a free-trade area for 825 million residents of the Western Hemisphere by 2005. However, it is unlikely to be in place in 2006 as planned.

South America. The US in 2004-05 is apprehending over 2,000 Brazilians a month on the Mexico-US border, prompting complaints to Mexico, which recently lifted visa requirements for Brazilians. Mexican officials are patrolling Mexican border towns in search of Brazilians in the hope of bolstering support for immigration reform legislation in the US that would improve the status of Mexicans. Brazil is one of 45 countries on which Mexico does not impose visa requirements.

Ecuadorian president Lucio Gutierrez, elected in 2002, was removed from office in April 2005 after street protests prompted in part by cuts in social spending demanded by the IMF. Gutierrez, who is of mestizo (mixed race) origins and from an Amazonian city five hours southeast of Quito, was seen as a great hope in a country where the 40 percent of the population that is of mixed race has long been excluded from power.

Most Latin American economies are struggling. There was a lost decade in the 1980s as import-substitution policies were dropped in favor of markets and free trade, but despite market-oriented policies in the 1990s, growth was uneven. Since 2000, poverty has increased and open unemployment has risen, reflecting a lack of formal job creation. In many countries, the wages of well-educated and less-educated workers has been diverging, increasing inequality.

There appears to be growing frustration among many Latin Americans who have endured the pain of market reforms but have not yet benefited from faster growth. Benefits of the market-oriented economic policies tend to be concentrated among the elite and the well educated, and governments have little room to cushion the effects of privatization and trade on the poor because of high debts. Argentina and Uruguay, for example, have debt-to-GDP ratios over 100 percent; only Chile has the 25 to 30 percent debt-to-GDP ratio considered sustainable in a developing economy.

In many Latin American countries, there are several tiers or layers in the labor market, with the 20 to 30 percent of workers who are public employees or employed in private formal sector jobs enjoying extensive protections and benefits. These workers resist changes that would make the labor market more flexible. However, without flexibility, the formal labor market is likely to remain small.