LIMITATIONS OF THE INTERNATIONAL LIMITATIONS OF THE INTERNATIONAL REMITTANCES AS A STRATEGY FOR LOCAL REMITTANCES AS A STRATEGY FOR LOCAL

DEVELOPMENTDEVELOPMENT

Rafael G. Reyes MoralesInstituto Tecnológico de Oaxaca

Alicia Sylvia Gijon Cruz Universidad Autónoma Benito Juárez de Oaxaca

Andrés C. Cruz ContrerasInstituto Tecnológico de la Cuenca del Papaloapam

Salvador López PlatasCentro de Estudios Tecnológicos y de servicios 124

Third Cumbre of the Great Plains

Understanding Immigration and the changing communities of the Americas: Lessons from new

destinations across the globe.

University of Nebraska at Omaha April 26-29, 2007

Introduction

In this presentation Mexico-US migration is analyzed from the perspective of its impact on the development of communities of origin.

It is based on eight communities each of which has a high proportion of Zapotec-indigenous people and is economically diverse.

Seven of these communities are rural villages and one is a market town which provides goods and services to rural communities.

It is addressed the development conditions in rural areas in

Mexico and the constraints of remittances as a basis for financing local development.

Frame of reference Studies based on the new economics of labor migration

assert that the financial remittances sent from migrants in the US to their households in Mexico have multiplier effects on the communities of origin. (Taylor et al. 2003; Yúnez-Naude 2000; Taylor and Adelman 1996; Sadoulet and de Janvry 1995).

Unfortunately, in the case of Mexico and other developing countries there is little evidence to support these claims. In the absence of banks in rural areas remittances do not meet the needs of either producers or consumers.

At present, remittances arrive in rural communities and are almost immediately spent in market towns where banks can be found thus only benefiting the town economies.

Furthermore, families without remittances usually do not gain access to bank credit.

Frame of reference In the absence of effective redistributive public policies that

might correct the negative results of Mexico’s neoliberal development model and the consequences of the North American Free Trade Agreement, people in rural areas have had to create their own strategies so as to secure survival and improve their family’s well-being.

The principal strategy is migration to the US which frequently allows migrants to meet not only these goals but also provides financial assistancet that can be used to maintain local cultural traditions (Rivera-Sánchez 2006; Gijón-Cruz, et al. 2000).

Migration within Mexico can serve as a further survival strategy but middle-sized cities and metropolises in Mexico are already overpopulated with people from the countryside.

As a consequence, around half of the urban population is poor, lives in squatter settlements, and is engaged in the informal sector of the economy (Reyes-Morales 1999; Duhau and Schteingart 1997).

Market towns

Oaxaca has preserved the spatial organization of the colonial and pre-Hispanic ages. It is based upon a network of market towns.

There are weekly circuits of itinerant markets known as tianguis. In addition, there is a fixed market consisting of specialized stores and services.

These market towns provide goods and services to rural communities within their market area and these areas form economically integrated microregions. This is the case of Tlacolula de Matamoros whose market area includes the communities of the Tlacolula valley in the Valles Centrales and many villages of the

Sierra Norte.

METHODS

A probabilistic survey was carried out to built the social accounting matrix (SAM).

This presentation is based on the SAM results of eight communities in the Central Valleys and Sierra Norte regions, Oaxaca State, Mexico.

The majority of these SAMs were elaborate through OAXACALIFORNIA project (Reyes Morales et al. 2001) and two SAMs come from graduate theses (Arellano Amaya 2003; Cruz Contreras 2002).

Characteristics of study communities, Oaxaca State, Mexico, 2000.

Community Type of economyMigratory intensity

index

Deprivation index

Total population

Tlacolula de Matamoros

Commerce and services

Medium Medium 11,087

San Juan Teitipac Self-subsistence agriculture and crafts.

High Very high 2,817

Santa Ana del Valle Very high High 2,140

San Sebastián Abasolo Small-scale commercial agriculture

Medium Medium 1,688

El Trapiche Medium High 850

San Pablo Macuiltianguis

Forestry

Medium High 443

Capulálpam de Mendez

High Low 1,298

San Mateo CajonosSelf-subsistence agriculture and crafts

High High 500

Fuente: CONAPO. 2002. Índice de intensidad migratoria México-Estados Unidos 2000, México, D.F.; INEGI. 2000. XII censo general de población y vivienda 2000, Aguascalientes, México; DIGEPO. 2002. Marginación municipal, Oaxaca 2000, Oaxaca, Oaxaca, México.

RESULTSRESULTS

Development and the impact of remittances

In the first instance, remittances meet the deficit facing rural economies of the Sierra Norte region.

Rural economies of the Central Valleys have a greater capacity to produce local production inputs because remittances are also used to finance peasant agriculture, small-scale commercial agriculture, handicraft production as well as housing construction.

Remittances have a further impact on a regional level. Housing construction and agriculture generates a demand for local manpower in areas of high migratory intensity. The increase in demand exerts upward pressure on rural salaries.

Labor shortages are met by workers from the neighboring communities and even from other regions of Oaxaca where migration levels are not yet so high. Migration has created distinct regional labor markets offering higher salaries to those paid in Oaxaca City, the state capital, for similar forms of employment.

In this way, some of the benefits of remittances are redistributed among rural communities.

Development and the impact of remittances

As a market town Tlacolula de Matamoros attracts the region’s monetary surpluses and recycles them through banking credits for investment in business and consumption.

However, it is clear that the flow of regional, national and international remittances does not represent a source of effective financing for the development of the communities of origin mainly because the huge flow of remittances to market towns reduces the funds available to other areas.

Structure of the gross production value. Two communities with timber economy, Sierra Norte region, Oaxaca State.

Economic activityCapulálpam de

Méndez2002

San Pablo Macuiltianguis

2000

Agriculture 4.6 % 11.4 %

Back-yard livestock 3.3 % 5.1 %

Commerce and services 70.0 % 83.5 %

Manufacture and crafts 5.5 % 0.0 %

Enterprises 16.6 % 0.0 %

Total 100.0 % 100.00

Fuente: Cruz Contreras, Andrés C. 2002. La construcción de la matriz de contabilidad social aplicada a Capulálpam de Méndez, Oaxaca y su utilización en el diseño de política económica regional, tesis de doctorado, UACH, p. 76; Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, p.51.

Structure of the gross village product. Two communities with timber economy, Sierra Norte region, Oaxaca State.

Economic activityCapulálpam de Méndez

2002San Pablo Macuiltianguis

2001

Value added (gross domestic product)$ 5,241,174

(40.7 %)$ 388,630

(28.0 %)

Imported inputs$ 6,673,232$ (51.7 %)

$ 762,662(55.0 %)

Local inputs$ 736,269

(5.7 %)$ 77,928

(5.6 %)

Government$ 244,248

(1.9 %)$ 158,028

(11.4 %)

Total$ 12,894,923

(100.0 %)$ 1,387,249

(100.0 %)

Fuente: Cruz Contreras, Andrés C. 2002. La construcción de la matriz de contabilidad social aplicada a Capulálpam de Méndez, Oaxaca y su utilización en el diseño de política económica regional, tesis de doctorado, UACH, p. 78; Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO- CEE, COLMEX, Oaxaca, Oax., México, p.51.

Households’ incomes at current prices. Two communities with timber economy, Sierra Norte region, Oaxaca State.

Economic activity

Capulálpam de Méndez2001

San Pablo Macuiltianguis2000

Total Percentage Total Percentage

Total income $ 19,493,463 $ 2,181,490

Local income $ 5,306,471 27.2 % $ 388,630 17.8 %

External income $ 14,186,992 72.8% 1,792,860 82.2%

Fuente: Cruz Contreras, Andrés C. 2002. La construcción de la matriz de contabilidad social aplicada a Capulálpam de Méndez, Oaxaca y su utilización en el diseño de política económica regional, tesis de doctorado, UACH, p. 80; Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO- CEE, COLMEX, Oaxaca, Oax., México, pp.48-9.

Structure of the gross production value of three communities with peasant agriculture and craft production, Central Valleys and Sierra Norte regions, Oaxaca State, 2000.

Economic activitySanta Ana del

ValleSan Juan Teitipac

San Mateo Cajonos

Agriculture 8.2 % 14.6 % 3.7 %

Back-yard livestock 7.6 % 12.5 % 2.5 %

Commerce and services 25.6 % 52.3 % 52.0 %

Crafts 58.6 % 20.6 % 41.8 %

Total 100.0 % 100.0 % 100.0 %

Fuente: Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, p.51.

Structure of the gross village product, three communities with peasant agriculture and craft production, Central Valleys and Sierra Norte regions, Oaxaca State, 2000.

Economic activitySanta Ana del

ValleSan Juan Teitipac

San Mateo Cajonos

Value added (Gross Domestic Product)

$ 4,862,708(64.8 %)

$ 3,969,520(60.9 %)

$ 1,815,329(34.1 %)

Imported inputs$ 1,738,759

(23.1 %)$ 1,189,330

(18.2 %)$ 2,293,022

(43.1 %)

Local inputs$ 631,166

(8.4 %)$ 814,811(12.5 %)

$ 849,546(16.0 %)

Government$ 275,758

(3.7 %)$ 545,246

(8.4 %)$ 362,539

(6.8 %)

Total 100.0 % 100.0 % 100.0%

Fuente: Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, p.51.

Households’ incomes at current prices in three communities with peasant agriculture and craft production, Central Valleys and Sierra Norte regions, Oaxaca State, 2000.

Economic activitySanta Ana del

ValleSan Juan Teitipac

San Mateo Cajonos

Total income $ 8,122,595 $ 8,402,470 $ 3,590,092

Local income$ 4,862,708

(59.87%)$ 3,969,521

(55.7 %)$ 1,815,329

(40.9 %)

External income$ 3,259,887

(18.3 %)$ 4,432,949

(44.3 %)$ 1,774,763

(59.1 %)

Government$ 275,783(8.46%)

$ 545,246(12.30%)

$ 362,539(20.43%)

Fuente: Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, pp.48-9.

Structure of the gross production value of two communities with small-scale commercial agriculture, Central Valleys and Sierra Norte regions, Oaxaca State.

Economic activitySan S. Abasolo

2000El Trapiche

2001

Agriculture 8.4 %2.07%

Small-scale commercial agriculture 7.7%

Back-yard livestock 3.8 % 2.01%

Manufacture 0.0% 72.86%

Commerce and services 80.1 % 23.06%

Total 100.00 100.0%

Fuente: Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, pp.50-1.

Structure of the gross village product of two communities with small-scale commercial agriculture, Central Valleys region, Oaxaca State.

Economic activitySan S. Abasolo

2000El Trapiche

2001

Value added (Gross Domestic Product)

46.0%24.2%

Imported inputs 26.5 % 73.5%

Local inputs 17.3 % 1.3%

Government 10.2 % 1.0%

Total 100.0 % 100.0%

Fuente: Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, pp.50-1.

Structure of the major economic indicators of Tlacolula de Matamoros, a market town, Central Valleys region, Oaxaca State, 2000.

Fuente: Reyes Morales, Rafael G. et al. 2001. Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, pp.48-9.

Economic activity Gross production

value

Gross village product

Households´ income

Agriculture 0.3 %

Back-yard livestock 0.5 %

Manufacture 1.9 %

Commerce and services 93.3 %

TOTAL 100 %

Value added (Gross Domestic Product)

66.1 %

Imported inputs 11.4 %

Local inputs 15.7 %

Government 6.8 %

TOTAL 100.00 %

Local income 47.5%

External income 52.5%

TOTAL 100%

Conclusions

Constraints facing the local development.

The absence of micro-level financing institutions in rural communities does not permit the recycling of remittances before they reach market towns.

The economic dependency of the Sierra Norte communities is partly due to the fact that these remittances are not invested.

Nonetheless, communities of the Central Valleys have reduced their deficits considerably within the region and their labor force is seasonally engaged in the regional labor market.

Conclusions Regional deficits could be reduced if production surpluses

were increased and the sources of income were diversified.

In the Central Valleys, rural communities have diversified their income sources through the following activities:

1) cultural and alternative forms of tourism; 2) investments in small business and handicraft production; 3) housing construction; and 4) exports of traditional products to the Latino market in the

United States.

In la Sierra Norte, communities have other economic initiatives:

1) Sustainable timber production.

2) Ecotourism and purified water production.

3) Fruit and flower orchards, trout farming and small-scale bread production.