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Migration OutlookMexico

November 2011

Economic Analysis

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The publication Mexico Migration Outlook is a joint project oBBVA Bancomer Foundation and BBVA Research, Mexico;

the Economic Economic Research Department provides new contributionsevery six months in the field o Migration studies which contribute to a better

understanding o this important social movement.

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Mexico Migration OutloNovember 2011

Content

1. Summary....................................................................................................................................................................................................................................................................2

2. The outlook or migration in Mexico

and remittances to Mexico ..................................................................................................................................................................................4

Inset 1: The increase in poverty among Mexican immigrants in the United States:

a result o the economic crisis....................................................................................................................................................................................................................11

3. The new Mexican immigrants in the United States, individuals with

higher educational levels and income ................................................................................................................................12

4. Has there been an evolution in remittances?

A historical review ......................................................................................................................................................................................................................19

5. Cost o sending remittances to dierent regions....................................................................................26

Inset 2: Remittances and remittance costs:

How is Mexico?..........................................................................................................................................................................................................................................................36

6. The eect o access to financial services

on the wellbeing o amilies receiving remittances ......................................................................39

7. Statistical Appendix...................................................................................................................................................................................................................45

8. Special topics included in previous issues ................................................................................................................56

Closing date: November 17, 2011

REFER TO IMPORTANT DISCLOSURES ON PAGE 57 OF THIS REPORT

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1. Summary

The number o unauthorized Mexican immigrants in the U.S. is lower, while the

number o documented immigrants continues to grow, although at a lower paceThe number o unauthorized Mexican immigrants in the U.S. was reduced by around 400,000between 2007 and 2010. In that period, the figures o the Current Population Survey (CPS) indicatethat the total number o Mexican immigrants remained constant, at levels o 11.8 million, so it isestimated that the number o documented Mexican immigrants that entered the United Statesshould also have grown by a similar figure (400,000 in the same period). Thus, although the numbo documented immigrants continues to increase, its growth rate has been reduced to hal, onaverage, compared with the levels observed prior to the global crisis.

Recent evidence confirms that the economic crisis is the determining actor inthe reduction o migration rom Mexico to the U.S.

Mexican migration to the United States tends to move in the same direction as the U.S. economic

cycle. This is the variable with which there is a greater correlation. There is evidence that the number oapprehensions by the U.S. border patrol o Mexican immigrants in the Unites States is reduced wheneconomic growth is weak, and increases when the U.S. economy strengthens. In recent years, the numbo Mexicans that emigrate to the United States has diminished due mainly to the economic situation in tUnited States, and, consequently, the border patrol has detained ewer Mexican immigrants.

The toughening o migratory policy and unemployment, actors that expelimmigrants rom some states in the U.S.

In those states o the United States where the application o antiimmigrant laws has been seen, ortheir implementation is being discussed, such as: Arizona, Florida, Georgia, Alabama and Tennesseethe presence o Mexican immigrants has diminished. In other states, such as Caliornia, Maryland,Oregon and Arkansas, the high unemployment rate could be leading to the departure o Mexicanimmigrants. In general, Mexican immigrants are moving toward states with low unemployment,

or toward states near those that have toughened actions toward immigrants, such as: Texas, NewJersey, Virginia, Washington and Michigan.

Poverty rises strongly among Mexican immigrants in the United States

The poverty rate among Mexican immigrants is double that o the general population in the U.S. anbetween 2007 and 2011 registered one o the highest increases, rom 22.1% to 29.8%, with which 3.5million are in a poverty situation in 2011.

The recovery o remittances will continue in 2011 and 2012

The BBVA Research base scenario considers that the generation o employment in the U.S. willcontinue, although at a slow pace, particularly or immigrants, given their greater degree o laborflexibility. This dynamic will have a positive impact on the remittances o Mexican immigrants, so thin dollar terms, there could be an increase between 6.2% and 6.8% in 2011, a figure surpassing what

we had projected at the beginning o the year, due mainly to the strong rise registered in Septembewith the depreciation o the peso. For 2012 we believe that the growth o remittances in dollars coube between 8.8% and 10.8%. A risk actor that could stop these recovery trends is the global situatiomainly in Europe and its potential impact on the U.S.

More than hal o the jobs recovered in the U.S. have been or Hispanics;Mexicans have also benefited

Between the ourth quarter o 2009 and the third quarter o 2011, data rom the U.S. Department oLabor show that the number o jobs in that country grew by 1.33 million; o these, 52% o the total wor Hispanics. Our estimates based on the CPS suggest that around 17% o the total number o jobsthat have been generated in that period have been or Mexican immigrants.

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Mexican migration increases among highincome wageearners in the United State

The new Mexican immigrants in the United States are, in the majority, documented workers, withhigher educational levels, and are being employed in higher job qualification levels. There is a grouo Mexicans earning high incomes that are emigrating to the United States, and whose number has

increased in recent years, although it is a small group, comparatively speaking, in terms o the total.In this case, emigration could be related to actors such as insecurity in Mexico. However, a deeperanalysis is required to draw more accurate conclusions to this respect.

Remittances have grown more than migration worldwide in recent years

The figures o the United Nations Population Division show that between 1990 and 2010 the numbo international immigrants in the world grew 1.4 times. During that same period, remittance flows inthe world increased 6.4 times, according to data rom the World Bank. Among the actors that explathis situation are: the trend toward the reduction o the cost o sending remittances, the greaterparticipation o new companies in the market or the transer o unds, the reduction o deliveriesthrough inormal channels, and technological changes, among others. Currently, there are dierentoptions or sending remittances: bank transers, the use o cards, transers through the internet, andtransers by cellular phone, among others.

The costs or sending remittances have tended to decline worldwide

The data o the World Bank Remittance Prices Worldwide (RPW) show that between 2008 and thefirst quarter o 2011, there has been a declining, although moderate, trend in the total average globacost to send $200 dollars, rom 9.81% to 9%; this despite the act that between the first quarter o2010 and the first quarter o 2011 there has been a slight increase in costs, a situation that could berelated to the recent worldwide financial instability.

Southern Asia and Latin America and the Caribbean, the regions that pay thelowest costs or remittances received

In the first quarter o 2011, the costs or sending $200 dollars by region o destination in SouthernAsia (SA) and Latin America and the Caribbean (LAC) were 6.56% and 6.82%, respectively; the highecosts are observed in Subsaharian Arica (SSA) and in Eastern Asia and the Pacific (EAP), with thesebeing, respectively, 12.73% and 10.08%. These dierences are explained in part due to competitionin the market or remittance deliveries, existing regulations and the technological and operationinrastructure in each region.

Mexico pays a slightly lower cost or remittance transers, compared to theaverage cost in Latin America and the Caribbean

Mexico presents a slightly lower cost than the average or a remittance o $200 dollars or LatinAmerica and the Caribbean, although, according to studies, this country is one o those that mostinfluence the declining trend observed in costs or the region and which has improved its paymentstructure downward. This has allowed or greater selection options or consumers and has promotethe eicient and sae reception o remittances rom most o the countries rom which these are sen

The amilies receiving remittances with access to financial services have apositive eect on their levels o economic wellbeing

Based on econometric techniques, there is evidence that credit and, thereore, financial servicesincrease the probability that households receiving remittances have greater access to goods andservices. It is concluded that access to financial services is a actor that avors the economic wellbeing o the households that recieve remittances. The greatest eects include having a computer,Internet access, and cellular telephones. These results are evidence o the importance o morehouseholds that receive remittances having access to financial services. This contributes towardthe improvement o their economic wellbeing and probably increasing the potential o the benefitsderived rom the reception o remittances.

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2. The outlook or migration in Mexicoand remittances to MexicoThis article describes the evolution o the number o Mexicans in the United States, both authorizedand unauthorized, ollowing the last economic crisis, the situation o Mexicans in the U.S. in terms oemployment, in which states in the U.S. their presence has diminished and in which it has increased. Walso oer our projections on the growth o remittances to Mexico or this and the ollowing year.

With the recent recession in the U.S., has the number o immigrants diminished,are they undocumented or do they have a visa?

In previous editions o Mexico Migration Outlookwe showed that the total number o Mexicanimmigrants in the United States has not increased since 2008; the total has remained stable.There is some evidence that in 2011 a slight decrease was observed. However, it will be necessaryto wait or the figures o the annual closing o inormation. Despite the above, some estimates

reveal that the number o unauthorized Mexican immigrants in the United States has diminished.The figures o the Pew Hispanic Center show a reduction o around 500,000 people in the periodbetween 2007 and 2010, while those o the Department o Homeland Security note a reduction oslightly more than 300,000 in the number o undocumented Mexican immigrants in the UnitedStates during the same time rame.

Considering a simple average o both estimates, we note that the number o unauthorizedMexican immigrants in the United States was reduced by around 400,000 between 2007 and2010. In that period, the figures o the Current Population Survey (CPS) indicate that the totalnumber o Mexican immigrants remained constant at levels o 11.8 million. Thus, the number ounauthorized Mexican immigrants was reduced by around 400,000. The number o documenteMexican immigrants that entered the United States must be a similar figure or the total numberregistered to have remained constant.

Graph 1

Total number o Mexican immigrants in the

United States

(Millions)

Graph 2

Unauthorized Mexican immigrants in the

United States

(Millions)

-

2

4

6

8

10

12

14

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2 0 1 0

Pew Hispanic Center Homeland Security

Source: BBVA Research with figures rom the expanded supplemento the March CPS (Current Population Survey) (1994-2011).

Source: Pew Hispanic Center and the U.S. Department o HomelanSecurity

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Between 2000 and 2006 (beore the economic crisis) on average the number o Mexican immigrantin the United States grew by approximately 500,000 year to year. O this total, around 300,000 wereunauthorized and close to 200,000 were documented. These figures suggest that although thenumber o documented immigrants continues to rise, the growth rate has been reduced to hal.

Why has migration declined?

The population census in Mexico or 2010 and 2000 suggests a reduction in Mexican migration abroad(mainly the United States) between those years. The figures show that in the fiveyear period prior to the2010 Census, there were 1.1 million persons that emigrated abroad in that period. In comparison with thefigures o the 2000 Census, a reduction is observed o 32% in international migration and a reductiono 36% in the number o persons that emigrated to the United States. Thus, the total flow o internationalimmigrants rom Mexico in the U.S. ell rom 96% to 89%.

Dierent actors have been noted as the main causes or the reduction o Mexicans emigrating to theUnited States, among which the ollowing are particularly significant: the toughening o migratory policy the United States and the economic crisis.

In Mexico, some conditions have improved that have allowed households more purchasing power ogoods and better educational opportunities, which has translated into a higher average educationallevel o the Mexican population. However, these improvements have not been enough to reduce thewage gap between Mexico and the U.S., which is still high. Inormation rom the Encuesta Nacional deOcupacin y Employment, ENOE (the National Survey on Jobs and Employment) and the CurrentPopulation Survey (CPS) shows that, on average, those workers born in Mexico living in the United Stateearned 4.5 times than those who lived in Mexico in 2005. By 2010, this dierence had risen to five times,so the wage gap had tended to expand. Thus, although there are some improvements in Mexico, thesecannot be considered the main cause that has stopped the migration o undocumented workers andreduced the migration o documented workers.

The actor that we have noted as the main cause is the economic crisis, although other actors sucas the toughening o migratory policy in the United States and insecurity in Mexico have also hadsome bearing.1 Mexican migration to the United States tends to move in the same direction as that

countrys economic cycle. This is the variable with which there is the greatest correlation. The figureo the Department o Homeland Security in the United States show that the number o Mexicansapprehended showed a rising trend between 1995 and the year 2000; in that period, GDP growth ithe United States also showed a rising trend. Between the years 2000 and 2010 there is a reductionin the number o apprehensions, a situation that coincides with lower GDP growth rates in the U.S.,and it is as o 2007 when the U.S. entered into a recession, that the number ell to its lowest level rothe time the apprehensions were first recorded.

Thus, the number o apprehensions o Mexican immigrants in the United States by the border patrol islower when when economic growth is weak and increases when the U.S. economy is strengthened. Inrecent years, the number o Mexicans seeking to emigrate to the United States has declined due mainlyto the economic situation in the U.S., and, consequently, the U.S. border patrol seizes a lower number oMexican immigrants. I the actions against Mexican immigrants were those that were mainly directed

toward preventing entry, the number o apprehensions would tend to rise, not to diminish as has occurrein recent years. To this respect, Tuirn and vila (2010) note that the prolieration o walls and ences alothose areas used to cross the border into the U.S. and detection using high technology has ailed, up tonow, in reaching its main objective (to discourage and stop the flow o undocumented workers) becauseit was not accompanied by other eective measures directed toward ordering (or eventually deactivatinthe binational labor market that encourages unauthorized migration.2

1 See the June 2011 edition o Mexico Migration Outlook.2 Cornelius (2009) also notes that the greater border surveillance does not stop the flow o undocumented workers, but only makes migrationmore expensive.

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Graph 3

Average wage or Mexican workers according

to place o residence.

(Current monthly pesos)

Graph 4

Mexican immigrants apprehended by the

U.S. border patrol and annual GDP growth in

the United States (Thousands and annual %

change)

-

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010

United States Mexico

-4

-3

-2

-1

0

1

2

3

4

5

-

200

400

600

800

1.000

1.200

1.400

1.600

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Thousand

Mexicans apprehended GDP growth ra

Note: In the ENOE the second quarter o each year is considered. Theinormation in dollars was converted to pesos with central bank dataon the exchange rate.Source: BBVA Research with ENOE and Current Population Surveydata, March 2005 to 2010.

Source: BBVA Research with Bureau o Labor Statistics data

As illustrated, the change that occurred in Mexican migration toward the United States as o the decadebeginning in 2000 and particularly since 2008 is mainly attributed to the economic cycle in the U.S.,despite the act that other actors have also had some bearing, although o less importance. Thereore,once the U.S. economy resumes its growth levels prior to the economic crisis, the demand or immigrantworkers will tend to increase and thereore, the flows o Mexican immigrants will reactivate gradually. Thiprocess will take some time due to high unemployment in the United States, as seen in the ollowingsections.

Certain improvements in the United States, but with structural weakness

Since the beginning o the economic recession in the ourth quarter o 2007, until the secondquarter o 2009, the date on which its conclusion was oicially declared,3 GDP in the UnitedStates contracted 5.1%. Later, the U.S. economy entered an expansive phase, with annual growthbetween the ourth quarter o 2009 and the second quarter o 2010 in each quarter o at least3.8%. Ater that, a slowdown phase began that awakened ears o another recession in the U.S.,which in the BBVA Research base scenario is unlikely. By the third quarter o 2011, the preliminaryfigures indicate growth o 2.5%, with which economic growth seems to be accelerating oncemore, although at moderate rates compared with the period prior to expansion. Thus, to date, U.SGDP has managed to show 5.6% growth since the end o the recession, due to which it has nowsurpassed its levels at the beginning o the economic recession; that is, the production that hadbeen lost seems to have been recovered.

In the case o employment, the situation has not been the same. O the nearly 8 million jobslost in the United State only about 25% has been recovered. Nearly 14 million people still remainunemployed, due to which the unemployment rate continues high at 9%.

3 By the National Bureau o Economic Research, an instituation in charge o noting the points o initiation and conclusion o an economrecession in the United States

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Graph 5

Real GDP in the U.S. at 2005 prices

(Billions o U.S. dollars and annual % change)

Graph 6

Employment in the United States

(Millions o people and annual % change)

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.04.0

6.0

12.2

12.4

12.6

12.8

13.0

13.2

13.4

13.6

2007Q1

2007Q3

2008Q1

2008Q3

2009Q1

2009Q3

2010Q1

2010Q3

2011Q1

2011Q3

132

134

136

138

140

142

144146

148

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Source: BBVA Research with figures rom the U.S. Department oCommerce

Source: BBVA Research with figures rom the Bureau o LaborStatistics

4 In the June 2009 edition o Mexico Migration Outlook, we noted that in the recovery stages, Mexican immigrants tend to be the most avodue to the labor flexibility that they ace.5 This situation was able to avor that the poverty rates o Mexican immigrants reduced their rate o growth in the years prior to 2011, as shownthe ollowing box.

More than hal o the jobs recovered in the U.S. have been by Hispanics; Mexicanhave also benefited

In the current context, o the jobs recovered, Hispanics have been the most avored, as have beenMexican immigrants.4 Between the ourth quarter o 2009 and the third quarter o 2011, the data othe Labor Department o the United States show that the number o jobs in the country increasedby 1.33 million. In that same time rame, jobs or Hispanics grew by 688,000. That is, 52% o the totanumber o jobs that were generated have been or Hispanics, which represents employment growto 3.5% or this group.

In the case o persons o Mexican origin, better results have also been observed than or the resto the population. While or the population in general, the unemployment rate decreased rom 10%to 9.1% rom the ourth quarter o 2009 to the third quarter o 2011, in the case o Mexicans, the

unemployment rate has shown a greater reduction in percentage points, rom 12.9% to 11.6% in thesame period.

Although the United States Department o Labor does not present figures on quarterly employmenor Mexican immigrants, our estimates based on the Current Population Survey suggest that aroun17% o the total number o jobs that have been generated since the ourth quarter o 2009 havebeen or Mexican immigrants.5

The recovery o employment that has existed or Mexican immigrants is to a large extent whathas allowed remittances to continue growth in recent months above that expected. I job recoverycontinues, Mexican immigrants will continue to be among the most avored and consequentlyremittances will continue their upward trend, although moderately.

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The main sectors where Mexican immigrants are gaining jobs are: retail, educational and healthservices, agriculture, fishing and reorestation, and proessional and entrepreneurial services. Thesectors where they continue to lose jobs are: tourism and leisure, other services and manuacturing

In which states is the presence o Mexican immigrants increasing?In which states is it declining?

The presence o Mexican immigrant workers has declined in some states, mainly due to thetoughening o antimigratory policies, which has led to the application o antimigratory laws or todiscussion regarding their implementation. This has occurred in the ollowing states: Arizona, Florid

Georgia, Alabama and Tennessee.

In other states, such as Caliornia, Maryland, Oregon and Arkansas. the high unemployment rate orMexican immigrants could be motivating their departure.

Graph 7

Jobs in the United States

(Thousands)

Graph 8

United States. Quarterly general

unemployment rate among the population o

Mexican origin

(Seasonallyadjusted data)

19.0

19.2

19.4

19.6

19.8

20.0

20.2

20.4

20.6

134

136

138

140

142

144

146

148

2007Q1

2007Q3

2008Q1

2008Q3

2009Q1

2009Q3

2010Q1

2010Q3

2011Q1

2011Q3

Hispanics

Total population

7.44Q 92

3.94Q 00

6.22Q 03

4.52Q 07

104Q 09

94Q

12.03Q 92

5.93Q 00

7.91Q 03

5.02Q 06

12.94Q 09

11.4Q

2

4

6

8

10

12

14

I-1989

II-1990

III-1991

IV-1992

I-1994

II-1995

III-1996

IV-1997

I-1999

II-2000

III-2001

IV-2002

I-2004

II-2005

III-2006

IV-2007

I-2009

II-2010

III-2011

Total population

Mexican*

33

33

Recession

77

66

Source: BBVA Research with Bureau o Labor Statistics data Seasonallyadjusted based on seats sectionSource: BBVA Research with figures rom the Bureau o LaborStatistics

Chart 1

Antiimmigrant laws in some states o the United States

Arizona SB 1070 April 23, 2010 July 29, 2010

Tennesse HB 670 June 28, 2010 January 1, 2011

Indiana SB 590 May 10, 2011 July 1, 2011

Georgia HB 87 May 13, 2011 July 1, 2011

Alabama HB 56 June 2, 2011 September 1, 2011Carolina del Sur SB 20 June 27, 2011 January 1, 2012

Florida SB 2040 Not approved

Utah HB 497 Blocked by Judge

Source: BBVA Research

In general, Mexican immigrants are moving to states with low unemployment, or to thosestates near those that have toughened actions toward immigrants, even though they havehigh unemployment. Between 2007 and 2011, the greater increases in the Mexican immigrantpopulation were seen in the states o Texas, New Jersey, Virginia, Washington and Michigan.

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Chart 2

United States: Mexican immigrants by state o residence (Thousands)

Population lossCaliornia 4,664 4,766 4,713 4,737 4,443 221 4.7 14.2%

Florida 387 297 250 245 227 161 41.4 12.1%

Arizona 674 693 588 604 585 89 13.2 7.7%

Georgia 289 249 273 247 227 63 21.6 10.4%

Oregon 147 172 158 148 86 61 41.2 14.0%

Maryland 104 52 37 55 51 53 51.2 3.4%

Tennessee 112 106 141 93 76 36 31.9 6.6%

Alabama 94 48 87 75 59 35 37.3 12.6%

Arkansas 67 40 52 46 34 33 49.8 10.7%

Colorado 238 256 185 207 207 31 12.9 16.1%

Texas 2,263 2,305 2,414 2,376 2,615 352 15.5 8.8%

New Jersey 95 213 152 187 209 115 121.5 9.9%

Virginia 40 47 59 76 99 60 150.2 9.2%

Washington 160 165 174 228 215 55 34.2 17.5%

Michigan 68 69 96 72 101 33 49.3 6.1%

Idaho 37 46 49 48 66 29 77.7 7.2%

Kansas 51 57 64 64 74 23 45.0 19.9%

South Carolina 40 46 40 42 63 22 54.7 3.9%

Illinois 627 613 636 635 647 20 3.2 13.2%

Nebraska 45 41 48 40 62 17 38.6 7.2%

Source: BBVA Research with figures rom the Current Population Survey

Our orecast or remittances

Given the current results o the perormance o the United States economy, which have beenmoderate but better than expected, we expect that, in 2012, economic recovery will continue at higher rate than this year, bringing with it slow but gradual job recovery in the U.S. throughout trest o this year and in 2012.

According to estimates or remittances during the last three months o this year, we oresee tharemittances will surpass 22.5 billion dollars or 2011 and will post an annual growth rate in dollarsbetween 6.2% and 6.8% . These figures surpass those noted in our previous edition o MexicoMigration Outlook, which we had initially estimated, due mainly to the strong increase registerein the month o September in view o the unexpected depreciation o the peso in that month,

which led remittances to grow 21.2% in annual terms that month.

The high peso/dollar exchange rate in the last two months has increased the amount oremittances expressed in pesos and has allowed that there could be a positive real growth oremittances. It is estimated that or 2011, the reception o remittances in pesos will increasebetween 3.6% and 4.2% with a real growth rate (discounting inflation) in remittances o between0.2% and 0.8%.

For 2012, we estimate in the BBVA Research base scenario that remittances will grow between8.8% and 10.8% in dollars, reaching approximately 24.9 billion dollars, a figure close to thatreported during the year 2008. I this growth is achieved, the increase in real peso terms receivein Mexican households due to these resources would be in a range between 5.6% and 7.6%.

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Chart 3

Forecast or remittances to Mexico

(Annual % change in dollars)

Graph 9

Mexico: Family remittances 2010-2012e

(Monthly remittance flow in US$ millions, bas

scenario)

1.250,0

1.500,0

1.750,0

2.000,0

2.250,0

2.500,0

2.750,0

3.000,0

2010-Jan

2011-Jan

2012-Jan

M

illionsofdollars(permonth)

Observed data Forecast

Estimated growth

rate ofremittances in 2011

6.2% - 6.8%

Estimated growrate of

remittances in 28.8% - 10.8%

Source: BBVA Research estimates e: Estimates made by BBVA Research as o October 2011.Source: BBVA Research with Banxico (central bank) figures.

The lack o a medium or longterm range solution in the Euro area could lead to negative economieects worldwide, and the volatility o the exchange rate could be actors that aect the scenarioorecasts or Mexican remittances, which imply lower figures than those commented above. For thireason, we believe that the orecasts could tend to go mainly downward.

Conclusions

Since 2007, a stagnation has been seen in the total number o Mexican immigrants in the United Stateand even some sources note that this year net migration has been negative. Various actors explainthis situation, with the most significant being the lack o employment opportunities in the U.S. derivedrom the economic crisis in that country. In recent years a moderate recovery o the U.S. economy ha

been observed, although the total number o jobs lost during the last crisis has not been recovered,more than 70% o jobs lost that continue without recovery.

The previsions or economic perormance in the U.S. in 2012 are relatively avorable and better thanthose or this year. I economic growth is maintained a couple o years, Mexican migration to the U.S.is expected to resume the growth trend o the years prior to the crisis, given that the broad wage gapbetween the two countries will continue.

Given this, the BBVA Research base scenario estimates the growth o remittances or 2012 to bebetween 8.8% and 10.8% in dollars, higher than what is expected or this year, and could reach levels oaround 24.9 billion dollars, a figure close to that reported during 2008. Given this growth, the increasein real terms o pesos received in Mexican households would be between 5.6% and 7.6%, and could behigher i the high peso/dollar exchange rate is maintained. A risk actor that could stop these recoverytrends is the global situation, mainly in Europe and its potential impact on the U.S.

As noted previously, the recovery o remittances to the levels o 2007 could take two to three moyears.

Reerences

BBVA Research Flash Migracin Mxico (2011), Flash Migracin Mxico. In September, remittancescould show their highest growth in five years BBVA, October 28, 2011.

Cornelius, W. (2009), Los migrantes de la crisis (The immigrants o the crisis), Presentation withinthe ramework o the Permanent Seminar on International Migration, on line.

2011 2012

Growth rate

in dollars6.2 a 6.8 8.8 a 10.8

Growth rate

in current pesos

3.6 a 4.2 9.5 a 11.5

Growth rate

in real pesos0.2 a 0.8 5.6 a 7.6

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Inset 1: The increase in poverty among Mexicanimmigrants in the United States: a result o theeconomic crisisAccording to the Current Population Survey (CPS), the

reduction in poverty1 that had been observed in the United

States until 2006 was reversed with the economic crisis.

In act, the number o people living in poverty increased

by 9.8 million between 2007 and 2011, rom 36.8 million to

46.6 million people, with 15% o the U.S. population living

in poverty in 2011. This increase has been the result o the

recent economic crisis, and even though it oicially ended inthe second quarter o 2009, poverty has continued to grow.

Poverty levels in the Hispanic community are above the

average or the general population and have tended to

increase more rapidly. In this case, poverty increased by 6

percentage points, rom 20.8% to 26.7%, reaching 13.3 million

people between 2007 and 2011.

Within the Mexican population, those o the secondgeneration or higher (born in the United States o Mexicanorigin) have lower levels o poverty than Mexican immigrants(born in Mexico) and have been less aected than theimmigrant community. In the ormer case, poverty levelsincreased by six percentage points, rom 21.6% to 28% in thesame time rame, while the number o Mexican immigrantsin poverty rose by eight percentage points to reach 29.8%,

corresponding to 3.5 million Mexican immigrants living inpoverty in the United States.

Thus, Mexican immigrants as a whole are among the groupswith high levels o poverty in the United States and wereamong the hardest hit by the recent economic crisis. Thisled them to have the highest poverty levels in the past twodecades, resulting in 3.4 million Mexican immigrants living inpoverty in 2011

1 The United States ollows a methodology or measuring poverty based on income. A poverty line is established using an index adopted by a Federal Interagency Committee in 1969and slightly modified in 1981. Mexico is currently applying a multidimensional approach, which in addition to income considers other variables as well.

Graph 10

Poverty levels in the United States

(%)

Brazil

China

Egypt

India

Indonesia Mexico

Turkey

0

2

4

6

8

10

12

14

0 2 4 6 8 10 12 14

Costas

%t

osend

$200dollarsin

2011Q1

Documented and undocumented migrants, millions, 2010

Source: BBVA Research with figures rom the March supplement to the Current Population Survey, 2005-2011

Chart 4

United States: Population living in poverty

(Millions o people)

Source: BBVA Research with figures rom the March supplement to the Current Population Survey, 2005-2011

Total

population37.6 37.6 36.8 37.7 40.3 44.0 46.6

Hispanics 9.3 9.5 9.3 10.0 11.1 12.4 13.3

Mexicans

o second

generation or

higher

3.8 4.0 3.8 4.1 4.7 5.6 6.0

Mexicanimmigrants

2.9 2.9 2.6 2.9 3.2 3.4 3.5

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3. The new Mexican immigrants in theUnited States, individuals with higher

educational levels and incomeMigration patterns have been changing throughout the course o the history o emigration romMexico to the United States. The first emigrants at the beginning o the twentieth century mainlywent into agricultural activities and as a group were characterized by relatively low levels oeducation and income, and they mostly came rom rural areas o the country. The principal points concentration were along the southern U.S. border, mainly in Texas and Caliornia. Subsequently, necharacteristics o Mexican immigration began to appear, as individuals with certain job skills weremoving into industry, construction, and services. Educational levels were rising and the presence oMexican immigrants was expanding to other regions dierent rom their traditional venues, such asthe north and toward other labor sectors.

In the past ew years new profiles have emerged or the wave o new emigrants to the UnitedStates. Dierent actors seem to explain the emergence o these new categories. For example, withthe recent U.S. economic crisis, there were changes in domestic demand or labor, a tighteningo immigration laws in various U.S. states, Mexicos own conditions as a country and the specificcharacteristics o each region, and internal dynamics among Mexican immigrants in the UnitedStates that reconfigure the nature and structure o social networks. This article in Mexico MigrationOutlookexamines specific characteristics and the scope and dimension o these new groups oMexican immigrants in the United States.1 The main source o inormation or this analysis is theCurrent Population Survey (CPS), prepared by the U.S. Census Bureau

For this article Mexican immigrants surveyed in the CPS were grouped at dierent intervals accordinto their year o entry into the United States, so that newly arrived immigrants in a given year areconsidered as those who entered the country in the past two or three years o each o the yearsstudied. Thus generational categories are established according to the immigrants date o entry.

Where are the new immigrants rom? What states did they go to?

Today, the states with the largest emigration flows are the same as 10 years ago; however thedynamics o some o these states have changed. Jalisco, Michoacan, Veracruz, and Mexico Citydiminished their importance in terms o emigrants leaving or the United States, while Oaxaca,Puebla, and Queretaro have increased their percentage share as immigrants states o origin.

In terms o places o destination2 in the United States, major changes can also be observed. AlthougCaliornia and Texas continue to concentrate the largest percentage o newly arrived immigrants,31.7% and 19.7%, respectively, between 2008 and 2010, significant changes can be noted in the resto the states in the patterns o Mexican immigration. States such as Arizona, Colorado, Nevada, NewYork, Oregon, Tennessee, and Wisconsin are no longer attractive or newly arrived immigrants, whilGeorgia, Indiana, Mississippi, New Jersey, and Virginia are currently on the list o possible destinationor new Mexican immigrants.

1 In this article we will provide continuity to the analysis contained in the June 2010 edition o Mexico Migration Outlook, where we noted thabetween 2000 and 2010 there were some characteristics o emigrants that remained relatively stable such as the percentage o men andwomen, and others in which changes occurred, such as the average age o the immigrants, which has tended to increase, and that is associatewith a decrease in the emigration o younger age groups. We also pointed to changes in the importance o the states rom which Mexicans emgrated, such as Guanajuato, which occupied third place in 2000, and moved into first place in 2010; Jalisco, Michoacn, and the State o Mexicwhich were and continue to remain important states in terms o emigration to the United States, have decreased their percentage share in totemigration to the U.S., while many o the states with the lowest emigration rates posted increases in this period.2 To avoid potential problems derived rom the CPS sample and to have a more accurate panorama, the first reerence map averages recentlyarrived immigrants with data or 2000 and 2001 and the second map averages the inormation rom 2010 and 2011.

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The states that concentrate the largest number o Mexican immigrants do not necessarily reflect thcharacteristics o recently arrived migrants and immigrants.

To determine i the relative concentration o Mexican states marked by high emigration and thestates with high immigration inflows in the United States has increased or decreased over time, theHerfindahlHirschman Index (HHI)3 was used. As can be seen in the ollowing table, in comparingthe 2008-2010 period to the 1998-2000 period, both the concentration o Mexican states with highmigratory outflows as well as the immigrantrecipient states in the United States has increased. HHIvalues can also be used to make cross comparisons. For both periods, the U.S. HHI is at least twotimes higher than Mexicos, indicating a broader diversity in the states o origin o Mexican emigranin comparison with the greater concentration in a ew destination states in the United States.

3 The HHI was devised by economists Orris Herfindahl and Albert Hi rschman and is widely used to measure the magnitude o concentrationsparticularly those concerning percentage shares in industry and the market. The HHI is calculated by adding the squares o the percentageshare o the categories involved. When the percentage is expressed in units between a range o 0 to 100, the HHI takes values between 0 and10,000, in which smaller values represent a lower concentration and higher values represent a greater concentration.

Chart 5

HerfindahlHirschman Index or measuring the concentration o Mexican immigrants by state oorigin and destination

Mexico 613 635

United States 1,395 1,513

Source: BBVA Research with data rom the CPS (Current Population Survey) (2000-2001 and 2010-2011) and the 2000 and 2010 Census

Graph 11

Main states o origin o Mexican emigrants to the United States and their states o destination

(% o total number o immigrants or the years indicated)

More than 10%

More than 5 to 10%

More than 3% to 5%

Origin between 1998-2000

More than 10%

More than 5 to 10%

More than 3% to 5%

Origin between 2008-2010

More than 20%

More than 10% to 20%

More than 5% to 10%

More than 2% to 5%

Destination from 1998-2000

More than 20%

More than 10% to 20%

More than 5% to 1

More than 2% to 5

Destination from 2008-2010

Source: BBVA Research with figures rom the 2000 and 2010 Population and Housing Census sample or the data on Mexico and the expandMarch supplement o the CPS (Current Population Survey) (2000-2001 and 2010-2011) or data on the United States.

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A smaller percentage o new immigrants to the construction sector and a highepercentage to the services sector

According to the CPS, Mexicans who recently entered the United States, specifically between 2005 and2007, showed a downward trend in occupying service sector jobs, rom 32.1% o the total to only 24.6%.

However, since 2008 there has been a steady increase in the percentage o recently arrived Mexicanimmigrants in service sector activities, with the corresponding figures being 37.8% in 2010 and 37.7% in2011. By contrast, the construction sector has declined in relative importance, given that rom 2006 to2008 over 35% o Mexican immigrants entering the United States obtained jobs related to constructionand/or mining and oil extraction. The subprime mortgage crisis that intensified in the United States inthe second hal o 2008 has resulted in ewer than 20% o newly arrived Mexican immigrants obtainingemployment in this sector.

Although there has been a modest recovery in the construction sector, the demand or immigrantworkers remains low. As previously noted, many immigrant workers who turn to this sector probablyhave low educational levels. It is possible that in the services sector, Mexican workers with relativelygreater job skills are being hired and thereore some Mexican workers with such characteristics arehaving opportunities to emigrate. In the next section we will urther analyze this point.

Graph 12

Percentage o recently arrived Mexican

immigrants with jobs in the services sector

Graph 13


immigrants with jobs in the construction and

mining and oil sectors

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2004

2005

2006

2007

2008

2009

2010

2011

2012

0.0%

5.0%10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

2004

2005

2006

2007

2008

2009

2010

2011

Source: BBVA Research with figures rom the expanded Marchsupplement o the CPS (2005-2011)


The new immigrants have a higher educational level

CPS figures show that beore the economic crisis, the percentage o Mexican immigrants with loweducational levels was very high and growing, and that in 2007, o the immigrants who had recentlyarrived that same year, 35% had, at most, six years o schooling. Meanwhile, the percentage o thosewith a college education or higher was not very statistically relevant and was decreasing. In 2007,

only 4% o recently arrived Mexican immigrants had that level o schooling.

With the economic crisis, the patterns have changed, and the percentage o Mexicans with six or eweryears o schooling entering the United States has declined and the percentage o new immigrants witha college level education or higher has increased. In act, one out o every nine Mexican emigrants whorecently let the country has at least that level o schooling. By 2011 both categories tended to havesimilar percentages. Thus new immigrants have higher educational levels on average.

The results shown thus ar in this study together with those in the section on the current situation,indicate that the new Mexican immigrants in the United States are mostly documented, have higheeducational levels, and are obtaining employment with higher job skill levels, and thereore it is likelythat they will have higher income levels. In the next section we will present a breakdown o thepercentage o Mexican immigrants in the dierent 20% income brackets in the United States.

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Graph 14


immigrants with less than a sixth grade

education

Graph 15


immigrants with a college level education or

higher

0%

5%

10%

15%

20%

25%

30%

35%40%

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

2%

4%

6%

8%

10%

12%

14%

2004

2005

2006

2007

2008

2009

2010

2011

Source: BBVA Research with figures rom the expanded March supple

ment o the CPS (2005-2011).

Source: BBVA Research with figures rom the expanded March

supplement o the CPS (2005-2011)

Graph 16


immigrants in the United States who are in the

first two 20 percentile income brackets

Graph 17


immigrants in the United States who are in th

third and ourth 20 percentile income bracke

67%

72%

77%

82%

87%

92%

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

5%

10%

15%

20%

25%

30%

2004

2005

2006

2007

2008

2009

2010

2011

Source: BBVA Research with figures rom the expanded Marchsupplement o the CPS (2005-2011). In the first 20 percentile bracket,individuals receive less than US$13,000 a year and in the second 20 percentile bracket they receive between US$13,001 and US$25,212 a year.

Source: BBVA Research with figures rom the expanded Marchsupplement o the CPS (2005-2011). In the third 20 percentile brackthe range o income is rom US$25,213 to US$40,000 a year, and inthe ourth 20 percentile bracket rom US$40,001 to US$63,763 a ye

The percentage o Mexican immigrants with very high incomes and businessactivities is on the rise

In this section we will classiy recently arrived Mexican immigrants according to 20% brackets o incomdistribution in the United States. The majority o the Mexicans are in the first two 20 percentile brackets(with an income under US$25,213 per year), a percentage that has remained relatively stable and doesnot appear to display a clear pattern with recent changes that have occurred with the economic crisis.In 2005, 81% o recent Mexican immigrants were in the first two 20 percentile brackets and by 2011 thepercentage had risen to 82%..

In the third and ourth 20 percentile brackets o income distribution in the United States are Mexicawho earn between US$25,213 and US$63,763 per year. Here the percentage o recently arrived

Mexican immigrants has been reduced to levels close to 18% in 2005 and to 14% in 2011.

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Finally we considered the case o recently arrived Mexican immigrants who are in the top 20 percentibracket or income distribution in the United States. This category involves individuals who in the CPSreported earning more than US$63,763 a year. In many cases their emigration is not dependent onthe demand that may exist or this type o immigrant, since some o them are individuals who can

invest and create jobs, given their income level. In addition, they can assume the costs o emigration,regardless o the socioeconomic conditions in their country o origin or destination.

While between 2005 and 2008, recently arrived Mexican immigrants who were in the top 20%income bracket accounted or between 1% and 2% o total emigration rom Mexico to the UnitedStates, or the last two years CPS data show that between 4.2% and 5.3% o all new Mexicanimmigrants were in the highest 20 percentile income bracket in the United States4. In other words,between our and five o every 100 Mexicans who have emigrated in recent years to the UnitedStates have a personal income o at least US$63,764 a year.5

An interesting phenomenon can be noted in this latter category o Mexican emigrants, since inclassiying immigrants by income bracket, it is the only segment registering an upward trend.Many o these emigrants are coming to the United States to engage in business and companymanagement activities, as seen by the CPS figures. While in 2005 less than 1% o total newly arrived

Mexican immigrants carried out such activities, in 2011 the corresponding figure was close to 3%.In general, a clear pattern emerges on Mexican emigration to the United States beore and ater theconomic crisis. This occurs with all the Mexicans who emigrate or employmentrelated reasons, ashown in changes in the number o H2B and H1B visas 6 that the U.S. government grants to workerBetween 2003 and 2006, a total o 218,065 o these types o visas were granted to Mexicanimmigrants. For the 2007-2010 period, the total number o such visas granted ell by 23% to 167,40

Graph 18

Percentage o newly arrived Mexican

immigrants belonging to the highest 20

percentile income bracket in the United States

Graph 19

Percentage o newly arrived Mexican

immigrants engaged in business and compan

management activities

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2004

2005

2006

2007

2008

2009

2010

2011

2012

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2004

2005

2006

2007

2008

2009

2010

2011



4 Only the civilian working population is considered; employees o the armed orces are not included.5 This is the approximate amount as o which the highest 20 percentile income bracket o the U.S. workorce in 2011 is calculated.6 The H1B visa is granted to proessionals in special occupations. This visa allows or a maximum stay o six years in the United States. The H2visa is granted or nonagricultural temporary employment in occupations with a shortage o American workers.

In the emigration o Mexicans with very high income levels, the pattern is dierent, as can be seenin the number o E1 and E2 visas that the U.S. government grants to oreigners engaged in high endbusiness activities, with a growing trend registered in recent years. In the 2003-2006 period, a total 5,712 o these types o visas were granted to Mexicans, while in the period o the 2007-2010 crisis, thcorresponding figure was 8,237, a 44% increase.

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The above results show that there is a group o very highincome Mexicans who are deciding toemigrate to the United States, and whose number is increasing. They are the only group measuredby 20 percentile income brackets that has increased in number. This emigration does not seem to bdriven, as in most cases, by the existing demand or Mexican immigrant labor. I this were the case,

it would display a behavior similar to that o other immigrants, and thereore, other actors may berelevant. Furthermore, since the U.S. economy now shows a greater weakness than beore the 2007crisis, it might have been advisable to have emigrated in that period and not now. In uture issues oMexico Migration Outlookwe will continue discussing this question, but or the time being a firsthypothesis that can be raised is that or this group o Mexicans, emigration could be related more toactors to leave Mexico, probably the increase o insecurity in the country, coupled with the search new job opportunities and proessional development, given that they have high levels o educationand income that would allow them to assume certain costs involved in emigrating rom Mexico.

Graph 20

Total number o H1B and H2B visas granted to

Mexican immigrants in the United States

Graph 21

Total number o business visas (E-1) and

investment visas (E-2) granted to Mexican

immigrants in the United States

0

10

20

30

40

50

60

70

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Total visas in2003-2006218,065

Total visas in2007-2010

167,404

Total visas in2003-2006

5,712

Total visas i2007-2010

8,237

0

50

1.0

1.5

2.0

2.5

3.0

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Source: Bureau o Consular Aairs, U.S. Department o State (19972010). The H1B visa is granted to proessionals in special occupations. This visa allows or a maximum stay o six years in the UnitedStates. The H2B visa is granted or nonagricultural temporary employment in occupations with a shortage o American workers.

Source: Bureau o Consular Aairs, U.S. Department o State (19972010). The E1 visa is or owners o a company or or those who havbeen oered employment in a company that is actively engagedin the international trade o goods and services with a high andcontinuous volume. The E2 visa is or those who invest substantialamounts in companies whose business activity is substantial in thsense that it should involve a major and continuous volume.

Chart 6

Recently arrived Mexican immigrants classified by 20 percentile brackets o income distribution

in the United States

2005-2007 average (A) 355,513 265,966 99,244 39,206 11,563 771,49

2009-2011 average (B) 176,066 149,562 42,798 14,451 14,465 397,34

Percentage change

between A and B 50.5% 43.8% 56.9% 63.1% 25.1% 48.5

Source: BBVA Research with figures rom the expanded March supplement o the CPS (2005-2011).

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Conclusions: changing patterns o Mexican immigrants indicate theopportunities that have opened due to the complementarity o the economies

The characteristics o Mexican emigration to the United States have changed, in general, as o 2008The main actor has been the economic crisis, but other considerations such as the tightening o

immigration laws in various U.S. states and changes in conditions in Mexico have also weighed in.Thus, net undocumented emigration has tended to approach zero, and there is even evidence o areduction in the total number o undocumented immigrants in the United States.

Some Mexicans have continued to emigrate toward the countrys northern neighbor. Most aredocumented immigrants with higher educational and income levels and they seek better skille

jobs, compared to what the norm was beore the economic crisis.

Most o the emigrants who have recently entered the United States while in percentage terms havea higher income than those who arrived beore the economic crisis, are in the lowest 20 percentilebracket o income distribution in the United States, and in these cases emigration seems to beassociated with demand or these workers labor.

However, there is a group o Mexicans with very high incomes who are deciding to emigrate to

the United States, and whose number has been increasing in recent years, even though it is acomparatively small segment in relation to the total.

It is possible that in this case, emigration is associated with other actors such as insecurity inMexico. However, a deeper analysis is required in order or more precise conclusions to be drawnconcerning the phenomenon. In subsequent issues o Mexico Migration Outlookwe will continuthe discussion and provide urther analysis on these issues.

Bibliographical reerences

Bureau o Consular Aairs, U.S. Department o State. http://travel.state.gov / visa/statistics/nivstats/nivstats_4582.html

INEGI, 2010 Population and Housing Census

INEGI, 2000 General Population and Housing Census.

Organization or Economic Cooperation and Development (OECD), International Migration Outlook2011.

U.S. Census Bureau or the Bureau o Labor Statistics, Current Population Survey (2000-2011).

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4. Has there been an evolution inremittances? A historical review*In Mexico Migration Outlookwe have analyzed dierent elements that are relevant to immigration,such as the determining actors behind this phenomenon, the behavior o migratory flows, the eectso new developments, such as climate change, social networks, and the impact o some antiimmigrantlaws in the United States, among other topics. We have also analyzed and estimated the economiccontribution o immigrants, eects on employment, and the amounts paid in taxes in both Mexico andthe United States. Thus ar we have ocused primarily on the movement o people, but with this articlewe begin an analysis o monetary flows. This study will describe the changes that have occurred in theway in which remittances are sent and will assess whether they have been avorable.

Two additional articles complement the analysis. They describe the main recent trends in the costs osending remittances worldwide and present a first approximation o the eects on their living standardso access to financial services in households receiving remittances in Mexico. In subsequent issues o th

publication we will analyze the use that the households make o remittances and how to strengthen theeects on the recipient amilies wellbeing. With the publication o these studies, we will begin a series oanalysis on development related issues.

Up until now, there have been relatively ew studies that analyze the behavior o remittances, bothinternationally as well as in Mexico, despite the importance o the number o immigrants worldwide andthe amounts o money they send back home. In 2010, some 214 million people were living outside theirnative country, and they sent an estimated US$325 billion in remittances back to developing nations.

Remittances have grown more than immigration

Historically, there have always been movements o people. With this in mind, in the June 2009edition o Mexico Migration Outlookwe showed that the first phase o massive migration, which iswell documented, occurred in the second hal o the nineteenth century, mainly in European nation

and rom Europe to other countries.1 In the case o Mexican emigration to the United States, the firstphase took place between 1900 and 1929, according to the analysis by Massey and others (2002). Sit can be said that immigration is not a new development.

Graph 22

Legal immigration to the United States

(Annual flows, in thousands o people)

Graph 23

Remittances and the number o immigrants i

the world

0

400

800

1200

1600

2000

1827

1841

1855

1869

1883

1897

1911

1925

1939

1953

1967

1981

1995

2009

-

50

100

150

200

250

300

350

400

450

500

-

50

100

150

200

250

300

350

400

450

500

1970

1975

1980

1985

1990

1995

2000

2005

2010

Millionsofpersons

Migrants Remittances

Source: BBVA Research with U.S. Department o Homeland Securityfigures

Source: BBVA Research with United Nations and World Bank figure

* We would like to express our appreciation or the comments o Moiss Jaimes, Ja ime Caballero, Rubn Torres, Marco Flores, Juan Lavalle, anSara Castellanos..1 Even though there have been other, previous migrations ollowing the discovery o the Americas, it is elt that the largest mass immigrationoccurred in the second hal o the nineteenth century.

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While remittances have been associated with the movement o people and presumably haveexisted ever since the early migrations, it has only been since the 1990s and even more sosince the decade that began in 2000 when they experienced a considerable expansion so thatthere is a new phase in the history o remittances worldwide, rom which Latin America and the

Caribbean have not been exempt (Lowell and de la Garza, 2002).Figures rom the United Nations Population Division (2009) show that between 1990 and 2010the number o international immigrants in the world increased 1.4 times, rising rom 156 millionto 214 million people. In the same period, the low o remittances in the world grew rom US$68billion to US$440 billion, i.e. a 6.4 old increase, according to World Bank data (2011).

What explains the huge expansion in remittances worldwide that has occurred in recentyears? Lozano (2004) noted that among the actors which have played an important role,not only driving the growth in remittances but also transorming the operation o the transersystem or such unds, are: the trend toward a decrease in the cost o sending remittances, agreater participation by banks and companies in the money transer business, a reduction inremittances sent through inormal channels, and improved accounting o amily remittances bythe central banks. Behind these changes are the advances in communications and immigrants

learning the use o new channels or sending remittances.In the next section we will describe the changes in the ways in which remittances are sentin order to have additional elements to explain the reasons or the recent strong growth inremittances.

Evolution o the remittance orms

The first mechanisms or sending remittances were through acquaintances and in some casesthrough the mail

Emigrants in the second hal o the nineteenth and early twentieth century who were headed toplaces o destination to work or fixed periods, in general, had to wait or the conclusion o theirperiod o work and return to their places o origin in order to take part o the income they had

earned with them or send it through amily or riends on their way back to their communities. Thewaiting time or receiving remittances or relatives o immigrants could be long and sometimesthe unds did not reach their destination. There was great uncertainty involved in sending thesesavings back home.

At that time, mail delivery companies began to appear in some regions, and in these cases someimmigrants made use o such services or sending remittances.

Even though since the late nineteenth century some companies began to oer money transerservices (Ochoa et al, 2003), in many cases the use o the mail, through wire transers, remainedthe principal means in dierent regions or money transers until the late 1980s and early 1990s.In this period, remittances in Mexico were monopolized by Telgraos de Mxico (Cevallos, 1998).International money orders were taking on greater importance than wire transers and in the firsthal o the 1990s they were the main way in which Mexican households received remittances (see

Lozano, 1998). Among its advantages is its low cost, but the time that transpired beore the moneyorder was received could be relatively long because the unds were sent to the beneficiaries througthe postal service or through acquaintances. In addition, there was the risk o not receiving the unddue to the loss o the money order as such.

In 1995, about 40% o remittances sent to Mexico were made through money orders, which led tothe emergence o a large number o oreign exchange bureaus in the 1980s and 1990s in places witimportant migratory flows (Perez and Alvarez, 2007).

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New ways o sending remittances: the contribution o technological changes

Subsequently, technological advances have allowed or streamlining the sending o remittancesand transorming the ways in which this is done. The greatest changes have been relatively recent,and, in general, have occurred since the late 1990s and the beginning o the 2000s. Thus, electroni

transers have gradually grown in importance on a global level as they have increased the speedo sending money and expanded the supply o these services. In the case o Mexico, while in 1995about 50% o remittances were sent by electronic means, the corresponding figure is now 97%. 2

One o the first alternatives was the cash option, that is, in the place rom which the transer isbeing made, money is delivered to a bank or a money transer operator (MTO), who are specializedoperators in the transer o money, which then transers the unds to the place o destination, with tresources being able to be obtained at dierent points (given the participation o new intermediariesuch as banks, currency exchange houses, retail chains, pharmacies, telegraph oices, among otherIn some cases it is also possible to transer the cash into a bank account in the destination country.This option began to take on importance in the second hal o the 1990s as a manner o sendingremittances to Mexico.

The use o bank cards, especially debit cards3, has been increasingly important as a mechanism or

receiving remittances in recent years. However, this expansion has not been as extensive in smallrural communities ar rom the cities, because o ew or no ATMs or retail outlets that accept cards aa means o payment.

There are dierent mechanisms or the use o cards, one o which is to send remittances througha bank account to the card o another person in another country. In some cases two people indierent countries can have access to the same account using two cards. In addition, prepaid cardsare now in use; they are purchased by the issuer and the money is received directly by the recipientin another country, with the issuer able to pay unds into the card. Orozco and others (2007) eltthat even though the use o the cards or sending remittances rom immigrants rom Latin Americaand the Caribbean is relatively low (about 7% o immigrants rom these countries use them to sendsuch unds), their use will be growing because many o the recipient amilies have limited accessto financial services4 and cards can meet some o their essential financial needs such as cash

withdrawals and purchases o basic goods, in addition to being a flexible payment instrument, onethat may be easier to use than traditional bank accounts.

In recent years, online money transers have also prolierated. From a website a person can sendmoney charged to their credit card, debit card or a bank account. The money can be retrieved in thorm o cash or be paid into a bank account.

Recently remittances sent through cell phones have increased in popularity and it is probable thattheir importance will increase in coming years. Through this system, the user can enter cash in theicell phone, which is recorded in an accounting system integrated with their account and have theunds sent to a cell phone number abroad, where the recipient receives a text message inorminghim or her that the money has arrived. In this case, banks and MTO have agreements with telephoncompanies to make the transer.

Remittance transers via cell phones have advanced the most mainly in Arican and Asian countries.Among the Asian countries are the Philippines, Malaysia, India, Pakistan, and Bangladesh. Among theArican countries where it is possible to receive remittances in this way are Kenya, Uganda, Rwanda,Benin, Ghana, Cameroon, Tunisia, Guinea Bissau, Ivory Coast, and South Arica.5

2 According to the statistics on remittances rom the Banco de Mxico, which are available on the banks website in the section on Balance oPayments.3 According to Orozco (2003), remittances sent via debit cards rom the United States to Mexico is the mechanism with the lowest costs.4 In an article to be published in a subsequent edition o this publication we will provide some estimates o the impact on access to financialservices or the immigrant communities.5 Transers via mobile phones are not tied to bank accounts in all o these countries. A case in which such a link does exist is that o M-PESA inKenya, which is discussed in Mexico Banking Outlook in July 2010. The great advantage o linking the transers to bank accounts is that the lathave deposit insurance in countries where it exists.

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A greater development o systems or sending remittances through cell phones will depend on theurther development o the required inrastructure. Ratha and others (2007) have noted that in somecountries, antimoney laundering regulations and laws against the financing o terrorism seem to be arestriction on reducing the costs o sending remittances, which has aected banks and mobile phone

companies ability to provide remittance transer services via mobile phones.6

In the case o Mexico, botthe money transer companies as well as the payment networks, including banks, have begun the searcor solutions to provide these services to their customers and users.7

Graph 24

Historical evolution o the mechanisms or sending remittances

Credit

card

Traditional

mail

Money

Orders

MTO and

bank transfer

Internet

transfers

Cell

phone

use

Electronic transfers

Decade of2000

90s80s

Faster and cheaper

Note: MTO (specialized money transer operators)Source: BBVA Research

With all these changes, new companies o dierent sizes have entered the sector by making thesending o remittances more eicient, reducing transer times, and encouraging a greater numbero such transers. In response, remittances have recently posted much higher growth than theincrease in the number o international immigrants, and thereore it can be shown that the advancepresented have been beneficial or the recipient households.

Immigrants have increased their preerence or ormal mechanisms or sendingremittances

As shown above, the channels or sending remittances have experienced a relatively rapid transormatioin the past ew years. Previously inormal channels were mainly used, but now with the entry o newplayers and the emergence o new technologies, the ormal mechanisms have taken on greaterimportance, by providing greater security and speed in sending remittances and, recently, lowertransaction costs, as well as acilitating access to financial services.

The inormal mechanisms involve the sending o remittances through amily and riends or throughnonregulated businesses that do not have permission to send money. Such channels are present incountries where the flow o remittances is not attractive or companies because o their low volume,in which oreign money transer firms are highly regulated by the state, or where the technology is not

very accessible (Orozco, 2004). In this regard, Freund and Spataora (2005) ound that between 35% and75% o total remittances through inormal channels are transmitted to one or another o the developingcountries and that there is tremendous regional variation, with inormal remittances to SubSaharan AricEastern Europe, and Central Asia being relatively high, while East Asia and the Pacific have relatively lowvolumes. In the case o Latin America, in countries such as Haiti, Cuba, and Nicaragua, inormal means osending money still represent an important share o the total.

6 In Mexico, the legislative ruling on the Law or the Prevention and Identification o Operations with Funds o Illicit Origin and the Financing oTerrorism was approved, which stipulates that financial institutions will be required to establish measures or identiying customers and dulysubmit reports on suspicious activities conducted by their clients and users (BBVA Research, 2011).7 Mexican financial authorities have made changes to the regulations to incorporate dierent levels o monitoring o accounts that raise suspicions regarding money laundering and the financing o terrorism. Prepaid cards are being replaced by accounts with level 1 risk, because theiroperating system did not contemplate any monitoring (BBVA Research, 2011).

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In general, in the inormal systems there is no guarantee that the money will reach its destination,and, in addition, the time it takes or it to arrive may be relatively long and uncertain.

The inormal mechanisms may be legal or illegal. The ormer include remittances rom immigrant omigrant workers in small amounts (where the transaction is legal), transactions conducted through

small businesses (when the transaction is legal), or sending assistance to regions aected by war(when the financial institutions on the scene are weak). Nonlegal inormal flows include moneylaundering and the financing o terrorism, and evasion o capital and currency controls (APEC, 2003

Formal systems include institutions that are part o the regulated financial sector, such as banks,credit unions, money transer operators (MTO), debit and credit card companies, as well as postalservices (APEC, 2003).

Chart 7

Formal and inormal systems or sending money

Formal

Oer better access to financial institutions,

greater security, more rapid delivery times

Inormal

Can be legal or illegal. There is no guarantee that

the money will reach its destination and the time

it takes to arrive is uncertain

Unregulated agents or companies

Source: BBVA Research

The dual financialremittance system

Even though ormal mechanisms have been most used or sending remittances, since they acilitatetheir delivery with greater security, it is important or the financial systems that they continue toencourage their use, given that in the inormal systems, although they may be legal, their anonymitis attractive to individuals and groups involved in illegal activities, and they thereore pose securityrisks, such as money laundering, and the financing o terrorism, which, in turn, aects the stability,transparency and eiciency o financial systems, and undermines the potential o an economy topost sustainable growth, according to the findings o the APEC report (2003).

Remittances sent through ormal channels can acilitate the expansion o the financial sector indeveloping countries. With deposits rom remittances, banks are able to increase lending operationsand oer financial products and services to both recipients and nonrecipients o the remittances.In addition, in the absence o the development o the financial system, remittances help ease creditrestrictions or the poor, improving the allocation o capital and, thereby, promoting economic grow(Giuliano and RuizArranz, 2006). DemirgKunt, Lpez Crdova, Martinez Peria, and Woodru(2001)s study analyzed the impact o remittances on the banking sector in Mexico and ound thatremittances are strongly associated with a greater breadth and depth o the banking industry, anincrease in the number o branches and accounts per inhabitant, and the amount o deposits in

relation to GDP. In the same vein, Aggarwal, DemirgKunt, and Martinez Peria (2006)s study, baseon figures or 99 developing countries that receive remittances, ound that they have a significantand positive impact on bank deposits and credit in relation to GDP, and it thereore concluded thatremittances promote financial development in developing countries.

Thus, the financial system is beneficial or remittances and remittances are beneficial or the financiasystem. As previously noted, there has been an evolution in the way in which remittances aresent, which has allowed or changes in the remittance market and, as a result, variations in costs.In the next article in this issue o Mexico Migration Outlookwe will analyze the costs o sendingremittances.

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Conclusions: technology and the entry o new players have avored the sendingo remittance, in less time and at a lower cost and with greater security inreceiving the unds

Remittances are a actor that is closely tied to immigration. Since the nineteenth century the

irst waves o mass emigration began to be documented and it is assumed that since thattime, immigrants began to send remittances back home. Over the years, remittances haveexperienced an evolution that mirrors migration lows. However, since the 1990s and withgreater strength as o the decade that began in 2000, remittances have been growing muchmore rapidly than global migration.

Technological changes in the 1990s and 2000s have been positive, as they have enabled remittanceto be sent more quickly, and, in addition, new companies have participated in the money transerbusiness, which has increased the supply o such services to consumers. Currently, and depending othe particularities o each country and remittance mechanisms, consumers have several options orsending money, such as bank transers, the use o bank cards, Internet transers, cell phone transers,among others. In the case o Mexico, the adoption o electronic mechanisms has been relativelyrapid in recent years and it is expected that in the uture with the adoption o the mobile phone and

correspondent bank modes, their use can first be increased and then expanded.With these changes, customers preerences or ormal systems have increased. This situation canbe beneficial or the development o financial systems, as dierent studies have shown, since itcan increase access to financial systems or a greater number o people , which can avor theirstandards o living.

In conclusion, the advances achieved in sending remittances have been avorable or bothconsumers and financial systems in general. It is expected that the range o services will continueto grow, more companies will continue to participate, and that the costs o sending remittance willtend to decline, and that these conditions will avor the continued upward trend in the amount oremittances being sent, beyond the key actors that explain the phenomenon o immigration andthat were analyzed in the first issue o Mexico Migration Outlookin June 2009.

Bibliographical Reerences

Aggarwal, R., DemirgKunt, A., Martnez Peria, M. (2006) Do workers remittances promote financidevelopment? World Bank Policy Research Working Paper 3957.

World Bank (2011), Estadsticas sobre remesas (Statistics on Remittances), available at

Cevallos, Diego Making Big Bucks on Expatriate Remittances available online at

DemirgKunt, A., Lpez Crdova, E., Martnez Pera, M. and Woodru, C. (2011), Remittancesand banking sector breadth and depth: Evidence rom Mexico, Journal o DevelopmentEconomics, Vol. 95, No. 2.

United Nations Population Division (2009) Trends in International Migrant Stock: The 2008 Revisioavailable at

Freund, Caroline and Spataora, Nikola (2005) Remittances: Transaction Costs, Determinants andInormal Flows, World Bank Policy Research Working Paper 3704.

Giuliano, Paola and Marta RuizArranz (2006) Remittances, Financial Development, and Growth, IZWorking Paper No. 2160.

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Lowell, B. Lindsay and Rodolo O. de la Garza (2002) A New Phase in the Story o Remittances. InRodolo O. de la Garza and Briant Lindsay Lowell Sending Money Home. Hispanic Remittances andCommunity Development. Rowman & Littlefield Publishers, Inc.

Lozano, F. (1998.), Las Remesas de los Migrantes Mexicanos en Estados Unidos: Estimaciones para

1995 (Remittances o Mexican Immigrants in the United States: Estimates or 1995) in MexicoUnitStates Binational Migration Study, Migration between Mexico and the United States: Vol. 3, ResearchReport and Background Materials.

Lozano, Fernando (2004), Tendencias recientes de las remesas de los migrantes mexicanos enEstados Unidos (Recent Trends o Remittances o Mexican Immigrants in the United States TheCenter or Comparative Immigration Studies

Massey, D., J. Durand, and N. Malone (2002), Beyond Smoke and Mirrors. Mexican Immigration in anera o Economic Integration.

Ochoa, H. Gmez, J.C., Inante, J. O. (2003), Giros Y Finanzas: Una Historia De xito Continuo en elMercado De Cambios, Estudios Gerenciales, Universidad ICESI.

Prez, A, and Coln, P. (2007), Las remesas amiliares en Mxico y sus inconsistencias, Anlisis

Econmico, Vol. XXII, No. 51.

Hctor Ochoa Daz, Juan Carlos Gomez Laguado, and Jos Orlando Inante Daz, 2003. EstudiosGerenciales,

Orozco, Manuel (2003), Changes in the Atmosphere? Increase o Remittances, Price Decline andNew Challenges Inter American Dialogue, Research Series.

Orozco, Manuel (2004) The Remittance Marketplace: Prices, Policy and Financial Institutions PewHispanic Center.

Orozoco, Manuel, Jacob, Katy, and Tescher, Jennier (2007) CardBased Remittances: A Closer Lookat Supply and Demand The Center or Financial Services Innovation.

Ratha, D, Mohapatra, S. and Vijayalakshmi, K. and Xu, Z. (2007), Remittance Trends 2007 in

Migration and Development Brie 3, Development Prospects Group, Migration and Remittances TeaServicio de Estudios Econmicos and Fundacin BBVA Bancomer (2009), Situacin MigracinMxico, June 2009.

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5. Cost o sending remittances todierent regions*

This article o Mexico Migration Outlookexpands the analysis o the changes in the various waysthat remittance deliveries are made. It approaches the characteristics o the remittance deliverymarket, and describes their structure, indicating the dierent actors that intervene and how theirparticipation aects the costs. Also, the main trends in costs at the world level and in the dierentregions are compared; the costs to Latin America are analyzed; and it is concluded by presentingthe trends in remittance delivery costs to Mexico rom the main cities in the U.S. with a presence oMexican immigrants.

Which actors aect the costs o remittance delivery?

In the remittance market, dierent actors participate who enable issuers o remittances to transmitthem to recipients in other regions. Thus, the more remittances are sent, the incentives or moreintermediaries to participate will be greater. There are multiple intermediaries, because not allcompanies have the structure to participate in remittance delivery alone; there is a specialization inthe delivery process. Remittance transmitting companies participate, as do agents contracted bythose companies to oer the money delivery services, and the agents who provide distribution inthe receptor locations, and the financial institutions that carry out the transactions, among others(Orozco, 2004). Thus, the number o agents participating in the delivery and the commissions thateach one charges or his participation will be a actor that will aect remittance costs.

Governments play an important role in the remittance market: they establish the regulatoryramework that indicates the requirements that companies must meet to be able to participate inthe remittancedeliveryreception market. In some cases, the regulations imposed can increasethe costs. To this respect, Orozco (2004) considers that the regulatory system in the United Stateshas increased the monitoring o these flows in recent years, due to which the costs have risen or

the companies in the investment o systems, administrative controls, as well as the expenses in thetraining o the personnel involved in the implementation o monitoring programs.

Chart 8

Elements in the remittance market and how they aect the costs

Remittance senders and receiversIn the markets where the most remittances are delivered, a higher number o intermediaries will have the incentive

to participate and, consequently, there will tend to be a higher supply o services and, as a result, lower costs.

Intermediaries in the delivery

o remittances

In the remittance delivery market,

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