Remittances play huge role in immigrant economy

Immigrants in the United States send more than $54 billion abroad every year, a practice that could compound the economic difficulties already facing some of the country’s lowest paid workers.

Proponents of reduced immigration and the tougher enforcement of undocumented residents have latched on to remittances, as the transfers are formally known, as a tool to pressure immigrants and even foreign governments.

Donald Trump, the GOP presidential nominee, adopted that tack early in the campaign when he proposed to block some of those payments to Mexico unless the country’s leaders cough up billions of dollars to construct a southern border wall.

{mosads}The proposal was hammered by immigrant rights advocates — including Democrats like President Obama and presidential nominee Hillary Clinton — and a slew of economists and foreign policy experts raised red flags about both the legality and the practicality of his strategy. Many warned it would simply create a black market of underground payments.

But Trump’s law-and-order immigration approach, the cornerstone of his unconventional campaign, thrust the once-obscure issue of remittances into the limelight, generating new interest in how the practice is regulated — and to what extent it affects the economic well-being of both the United States and the recipient nations.

The numbers are not insignificant. 

Mexico, the top receptor of remittances, received $24.4 billion in 2015 alone, representing roughly 2 percent of the nation’s economy. That year, remittances surpassed oil exports for the first time in the country’s history. And immigration activists have long fought to protect those payments because they represent a lifeline to many communities who receive them.

“Remittances obviously provide enormous economic stability and prosperity to countries [where] it’s in our national interest for them to be stable and prosperous,” said Angela Maria Kelley, executive director of the Center for American Progress Action Fund.

A 2014 study by the Inter-American Development Bank concluded that remittances sent to Mexico provided nearly 20 percent of income for the country’s poorest rural communities.

Although worldwide remittances dropped in 2015 for the first time since the Great Recession, transfers to Mexico are again growing in amount and buying power. 

A study released last week by Banco de Mexico, the country’s equivalent of the Federal Reserve, showed a 6.61 percent uptick in the first eight months of 2016, compared to the same period in 2015.

Part of that may be directly linked to Trump and his proposals. 

The Mexican peso’s value has fallen from 15.39 per dollar on June 16, 2015, following Trump’s presidential announcement, to 18.85 on Friday. The currency has closely mirrored Trump’s highs and lows in the polls, although other factors, like the price of oil and U.S. interest rates, are also at play.

A weaker peso means remittance receptors can buy more with the dollars they receive, encouraging their family members to send more.

The economic consequences of remittances on the U.S. economy are nebulous, leading to sharp disagreements between supporters and those who want tougher policing — a debate that tends to run along partisan lines.

Supporters say that by putting money in the pockets of foreign nationals, the transfers empower those consumers to purchase more goods, including U.S. exports.

Additionally, by helping foreign economies prosper — particularly those in Mexico and Central America — the payments encourage foreign residents to remain at home, supporters say. Cutting off that cash spigot, these voices warn, could spark the very type of migrant wave that Trump’s wall is designed to protect against.

While remittances play a key role in maintaining quality of life in receiving communities, workers sending them sometimes sacrifice their own economic well-being to support their families overseas.

Mirna Duarte, a Nicaraguan member of the National Domestic Workers Alliance, told The Hill that supporting her family “represents a reduction in the income one needs to live in this country.”

But Duarte, who has been in the United States for more than 7 years, said she wouldn’t stop sending money because “we have to be mindful of our family, because they need the help and this is the only way one can help.”

The critics of the current remittance structure cite a host of reasons they’re pushing for changes.

Ian Smith, a researcher with the Immigration Reform Law Institute, said that the current system only bolsters “chronically corrupted leaders” in places like Mexico.

Roy Beck, head of Numbers USA, a group that fights to reduce immigration levels, said “the humanitarian value” of sending money to poor communities abroad means “less value … to the larger U.S. economy in which the wages fail to circulate and provide additional jobs in the U.S.”

“I have no criticism of immigrants deciding to move their wages out of our economy,” Beck said in an email, “but that action is one of the ways that hiring new immigrants rather than hiring non-working Americans creates fewer economic advantages to Americans.”

And Kansas Secretary of State Kris Kobach, an immigration hard-liner who influenced Trump’s remittance plan, said the payments only encourage immigrants to migrate illegally to earn money to send back home.

Kobach acknowledged that it’s “particularly difficult” to gauge the impact of the transfers on the domestic economy “because you don’t know what the money would have been spent on if it had stayed in the United States.” He also emphasized that legal residents should have every right to send their money wherever they please. 

But Trump’s plan to block those payments for undocumented immigrants is “quite reasonable,” Kobach said Friday by phone, particularly for the purpose of forcing Mexico to pay for a border wall.

Immigration rights advocates see things differently.

“Kobach’s immigration policies tend to have the hallmarks of being both impractical and cruel,” said Miranda Blue, research editor at People for the American Way, an advocacy group.

Policymakers at the federal and hemispheric level have sided with the idea that remittances are impossible to restrict, regulating financial institutions to protect consumers and to prevent senders from relying on the black market. 

“It’s a strictly voluntary phenomenon. Those who have tried to manipulate it have failed. It’s a family relationship,” said Arturo Corrales, the Honduran government’s special envoy to the United States.

“Remittances now go through the banking system. Not 100 percent, but above 90 [percent],” he added.

But a handful of conservative lawmakers, at both the state level and in Congress, have proposed legislation in recent years that would slap taxes or fees on remittance payments made by those who could not prove their legal status. Oklahoma has implemented such a law; Arizona and Georgia have pushed similar versions in years past; Sen. David Vitter (R-La.) and Rep. Tom Price (R-Ga.) have proposed such a bill in the current Congress; and Trump’s plan goes a step further, proposing to block undocumented immigrants from making any transfers until Mexico covers the cost of the border wall.

“The majority of that amount comes from illegal aliens,” Trump’s website reads. “It serves as de facto welfare for poor families in Mexico.”

The proposals are designed for different purposes: some to prevent money from leaving the country; others to recoup money for government services available to undocumented immigrants; the Vitter/Price bill would dedicate new funds to bolster border security; and Trump’s bill aims to build negotiating leverage with a foreign power. 

But by targeting illegal immigrants with additional burdens, some experts say, the underlying aim of Trump’s law-and-order immigration plan is very broadly to encourage their exodus. 

“If you really want to deport 11 million people,” said Stan Veuger, resident scholar at the American Enterprise Institute, “you have to find them and make life hard for them.”