It Starts in Mexico: Rethinking immigration reform

At first I thought it was just the tequila talking. While on assignment in Mexico City this past summer, I met some colleagues at a cantina to have a few drinks and solve the hemisphere’s problems. The conversation inevitably turned to U.S. immigration reform, which had just collapsed in Washington. Mexico’s President Felipe Calderón was cranking up the nationalistic protests against U.S. plans to build a 700-mile-long border fence costing as much as $7 billion. Mexican journalists usually echo their government’s anti-gringo indignation on such issues. But not tonight. “Go back and tell Bush to build the fence,” one told me. Others at the table heartily agreed. I did a double take, wondering if Lou Dobbs had just sat down with us. But they were serious.

Their turnabout reflects a change that has taken place in Mexican attitudes ever since a more genuine democracy emerged there seven years ago. In the minds of many, building the fence—and, theoretically, allowing far fewer migrants to cross illegally into the United States—would finally force Mexico’s leaders to confront the inexcusable inequality that pushes almost a million Mexicans over the border each year. For decades, the jobs in America’s vegetable fields, restaurant kitchens and hotel laundries have been an all too convenient social safety valve, taking the pressure off the Mexican elite. That overprivileged class has produced the world’s richest man, telecom billionaire Carlos Slim Helú; but it seems oblivious to the fact that almost half of Mexico’s 106 million people live in poverty—a quarter of them in extreme poverty, surviving on about $1 a day.


My Mexican colleagues were simply acknowledging what most Americans still fail to grasp: immigration reform is not domestic policy; it’s foreign policy. Approaching it as the former has led us to one failed immigration scheme after another. I started my career in the 1980s covering the Reagan administration’s sweeping amnesty for undocumented immigrants and its crackdown on employers who hired them. That was followed in the 1990s by the Illegal Immigration Reform and Immigrant Responsibility Act, intended to “seal” the frontier with fences and thousands of new border patrol agents. Result: by 2000, the number of migrants entering the U.S. illegally had actually risen to a record of almost two million a year.

By then the message should have been clear: instead of trying to curb illegal immigration at the border, we should try reducing it at its source inside Mexico and Latin America, the region with the world’s widest income disparities. As long as so many millions south of our porous border live in grinding poverty (and as long as the world north of the border remains addicted to cheap fruit-picking, dish-washing and room-cleaning), illegal immigrants will keep coming. But if we could work with countries like Mexico to steer more of their wealth and ours to the impoverished by means of better jobs, education and entrepreneurial opportunities—if we were to steer billions to those efforts instead of fences—we might not need the fences.

Increasing Capital and Credit in Mexico

Mexico is a conservative nation. But last year a leftist, Andrés Manuel López Obrador, came within less than one percentage point of defeating Calderón in the presidential election (and would have won had he not been such a strident and messianic campaigner). The main reason for his appeal is that his platform included commonsense economic reforms that Lou Dobbs and other immigration grouches should have applauded. Among them was a big increase in the amount of capital and credit for small farmers and small-business owners, who are the forgotten sector of Mexico’s economy even though they employ almost two-thirds of Mexico’s workers. “For once,” López told me during his campaign, “we’re going to confront the great sin of the Mexican economic system—that it doesn’t create jobs.”

Or at least jobs decent enough to “keep our young people,” as López often shouted on the stump, “from having to abandon their towns and families for the other side of the border!” Calderón, a conservative who was favored by Mexico’s notorious business monopolies, found himself having to co-opt much of López’s rhetoric in order to win, insisting, for example, that “one kilometer of new road in Oaxaca,” one of Mexico’s poorest states, “is worth more than 100 miles of fence on the border.” Now it is up to Calderón, and us—whether we like it or not—to prove that notion right.

There is increasing consensus among Mexico’s poor, as well as its policymakers, that one of the best means of doing that is microcredit. The idea of bringing small business loans to a nation’s most remote and economically depressed regions got a boost last year when the Bangladeshi micro-credit guru, Muhammad Yunus, won the Nobel Peace Prize. Few countries need microcredit more than Mexico, where for tens of millions of citizens access to the wealth-generating benefits of a banking system is as rare as potable water.

In the developed world, for example, there are usually fewer than 2,000 people per bank branch. In Mexican states like Oaxaca the number is 38,000, according to the Mexico City-based Association of Mexican Social Sector Credit Unions (Amuccs). What’s more, Mexico’s banks all but shut out small enterprises with exorbitant interest rates and maddening red tape. “That’s one of Mexico’s ugly paradoxes,” says Isabel Cruz, director of Amuccs. “It actually has one of the hemisphere’s largest financial systems, but it loans very little to its own economy.” Only three banks, in fact, handle 70 percent of Mexico’s financial activity, and little if any of it is conducted in the rural areas that produce the lion’s share of illegal immigrants.

Creating Jobs and Improving Schools

Many of those immigrants have now decided to do what Mexico’s banks won’t. Mexicans in the United States send home as much as $25 billion in remittances each year; and while much of it used to be wasted on flashy pickup trucks, wide-screen televisions and (apologies to my fellow Catholics) ostentatious churches, more is now being used to start local microcredit banks. The hope, of course, is that fostering new, job-creating businesses at home will eventually keep Mexican workers at home.

That ideal is being borne out in a small but growing number of rural Mexican towns, especially in the country’s backward south (where López, not surprisingly, won almost every state last year). Earlier this year I visited one of them, Santa Cruz Mixtepec, an indigenous Mixtec community in the rugged mountains of southern Oaxaca. Two-thirds of Santa Cruz’s 3,000 residents live undocumented al otro lado, “on the other side” in the United States; and each year they send back almost $1 million. A few years ago the wives in Santa Cruz took a chunk of that money and founded a microcredit bank, Xu Nuu Ndavi (Mixtec for “Poor People’s Money”). With starter loans of $5,000 and up, Xu Nuu Ndavi has helped build businesses as diverse as furniture-making and tomato greenhouses—a sorely needed shot in the arm for a town that still farms with oxen and wooden plows.

Slowly but surely, Xu Nuu Ndavi is yielding the most important result: Santa Cruz’s workers are starting to return to este lado, or “this side,” and some who considered leaving have decided to stay. One is 30-year-old Alberto Bautista, who recently came home from Arizona to work at his uncle’s new carpentry shop and start a family. Another is Roberto Hernández, who was poised to jump the border until he got a loan to start a metal window-frames business that he says should soon employ 10 people. “Opportunities like this are like infecting a child with a cold virus,” Hernández told me with a laugh while adjusting his blowtorch. “It spreads.”

Modesto Ramos, who has returned from Virginia, where he did construction work, caught the bug in a big way. Near his home now stands a complex of tomato greenhouses, each covering some 1,500 square feet, which from a distance look like large crystal bubbles amid Santa Cruz’s small cinder-block homes. Stroking his Fu Manchu-like moustache, Ramos proudly strolled up and down the rows of plants, whose saladette tomatoes are in huge demand in this part of Mexico, and inspected the new indoor irrigation equipment he recently installed. “I listened to President Calderón talk about development on the radio a couple nights ago,” he said. “But you can’t talk about development until you start investing money in communities like this, with decent interest rates and more flexible terms,” like those that Xu Nuu Ndavi offers.

Olivia Mendoza, one of the microbank’s founders, said 95 percent of the loans so far have been paid on time—a sign, she added, that locals want to make this program work “in order to bring our families back together.” She also knows that microcredit is not a cure-all for the migration plague. Rural schooling in Mexico, for example, has yet to enter the 20th century, let alone the 21st. “We need much more investment in education out here,” Mendoza noted, “if we’re going to make our kids employable in jobs with living wages.” Another useful effort would be what’s known as “legalizing” the poor: giving marginalized citizens like the Mixtecs formal legal title to their homes, businesses and other assets (which in Mexico’s informal economy are estimated to be worth some $315 billion) so they can parlay them into collateral for bank credit and investment capital.

Revising Trade Agreements

The bigger point is that all these illegal-immigration remedies are what the United States can, and should, make a foreign-policy priority if we want to break our chronic cycle of immigration-reform debacles. Since the end of the cold war, America has too often tried to substitute free trade for foreign policy, especially in Latin America, a region Washington usually dismisses as geopolitical trailer trash. Free trade per se is hardly a bad thing. Since the North American Free Trade Agreement took effect in 1994, Mexican exports to the United States have leapt from $40 billion to about $200 billion. But at the same time, the share of national income for Mexico’s richest 10 percent has grown significantly, while that of the poorest 10 percent has declined. And that of the rural poor has plummeted: fewer than 3 percent of Mexican farmers today can compete with cheaper, and heavily subsidized, agricultural imports from the United States.

Nafta has obviously failed as a solution to illegal immigration, partly because the wealth it has created simply does not flow through Mexico’s economic bloodstream, and partly because it has put Mexico’s campesinos, or farmers, at an insurmountable disadvantage. One way we can help correct that is to revise Nafta to reduce agricultural tariffs at a less severe pace, while at the same time reconsidering our lavish subsidies to U.S. farmers.

Another is to get into the microcredit act. A $7 billion border fence might make America’s xenophobes feel better in the short run. In the long run, however, they would be doing themselves a bigger favor by lobbying their congressmen to channel that money as foreign aid to microbanks like Xu Nuu Ndavi—and to pressure the Mexican government to pony up, too. The World Bank last year announced a $1 billion fund for small-business loans in Latin America, and the United States should follow suit (with much more cash than the paltry figures the Bush administration has discussed thus far). Promoting more business enterprises means more Mexicans participating in Nafta and, logic dictates, fewer Mexicans crossing the Rio Grande.

This brings us to the most urgent reform Washington needs to push in Mexico: dismantling the power of its ravenous monopolies and oligopolies, which control every industry from television to cement to sliced bread. They are the main reason that credit and capital get choked off from Mexican society, but Mexico can get away with it by simply exporting its desperate workers to the United States.

Rogelio Ramírez de la O, one of Mexico’s most respected business consultants, joined the López campaign because he is convinced his country cannot continue this way. He is no fan of the Lou Dobbs lobby, but he grins when he hears the U.S. Congress threaten to tax the lucrative migrant remittances that Mexico relies on to prop up its lopsided economy. “The Calderón cabinet,” he says, “is very nervous about that one.” Taxing that money, unfortunately, would almost certainly put undue hardship on Mexico’s poor. But like the fence, it is a tempting idea if it could jolt Mexico into meaningful reform. And you do not need a few tequilas to feel that way.

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11 years ago
I don't think Lou Dobbs is a grouch. He makes eminent good sense!!!!
11 years ago
I don't think Lou Dobbs is a grouch. He makes eminent good sense!!!!
John Walton
11 years ago
The reason that micro loans work is that the borrower and lender are typically known to each other. Thus default carries with it "social" as well as financial risk. But just to address Mexico, one wishes that the new income tax reforms in Mexico were not tilted against job creation. While the marginal tax rate is to be reduced, the deductibility of wage inputs is to be eliminated. Thus, at the margin it becomes more expensive to hire workers. Additionally, while you applaud micro credit, the new tax reforms eliminate the deductibility of interest as a legitimate business expense. While this has the effect of mitigating "risk", it will eventually starve the economy as capital projects become difficult to finance. Mexico's oil economy is in decline with production and reserves ebbing, this "owing to" inadequate capital investment. This could be a 21st century disaster.
John Braun
11 years ago
Mr. Padgett's article is simply the best I've read on the subject of immigration reform. I'm happy to see some sense finally coming to the surface.
Charles Curtis
11 years ago
Mr. Padgett's apology to "his fellow Catholics" for criticizing poor Mexicans' choice to build "ostentatious churches" with their remittance monies is a nice touch. Especially when such "profligacy" is equated with purchasing flashy trucks and wide screen T.V.'s. I suppose all will be considered well in Mexico when the campesinos build cheap ugly sanctuaries, and then sleep in or watch futbol and golf on Sunday mornings, in nice suburban developments with Lexuses and SUV's parked in every drive, just like we do. I do not romanticize their material poverty. And I think virtually everything Mr. Padgett suggests in the article worthy (even if some of it is utterly fantastic- cut agribusiness subsidies and allow Mexico to close its markets to US imports? Expect the Dobbsian mob to consider the plight of Mexicans, and the root causes of their poverty, rather than wallow in xenophobic chauvanism? Come on, dude.) Still, I cannot help but think of Lazarus and Dives, or the widow and her penny. I've never heard Dobbs say anything as vulgar, stupid or materialistic as to criticize lavishing filthy lucre upon the building of a beautiful shrine unto the Living God. You call yourselves a Catholic publication? Fie, for shame. Apology not accepted. This sort of materialism has vandalized our churches este lado, don't expect me to approve of you expecting them to vulgarize and sterilize theirs. I've had enough of neo-iconoclasm. But then, the apology's misdirected. As usual you are only thinking horizontally - economically and politically. The most important aspect remains untouched. I - and your other fellow Catholics - are not the ones you need to placate.
11 years ago
I am not sure I support causing anyone more misery, so I do not support the Berlin-like wall on our southern border. I do think that the writer is on point when he says that it is a foreign policy problem. We should be in dialogue with Mexico about some changes that cause their people to leave. That includes investment, trade, business and yes, human and labor rights. We also should be aware that the history between the two countries, includes filibusters such as William Walker and Henry Alexander Crabb as well as great distrust of foreigners having extensive Mexican holdings, plays a significant role in any dialogue. Americans really have difficulty seeing a situation through the eyes of others. In regard to small loans for business, I know they will work. Let me tell you my experience. I am a retired consultant from the California Workers Compensation Appeals Board. One of my duties was to mediate disputes regarding rehabilitation benefits. I and my colleagues saw numerous plans where an injured worker did not have the right to work in this country but did have the right to medical, permanent disability and rehabilitation benefits. Thus, with a counselor he or she would develop a return to work plan in Mexico. These were self-employment plans that used some insurance money and the worker’s settlement money to set up various small businesses. These businesses usually succeeded. This was not a handout. The worker had to risk some of his money plus his insurance benefit. If he failed, he would be worse off than before he got hurt. What kind of businesses did I see? I recall a taxi cab company set up in Acapulco using cell phones to direct cabs. (The invention of cell phones allowed Mexico to jump ahead without depending on the telephone pole communication system.) I saw single truck companies, butcher shops and small grocers. These are much like the carpentry shop, metal window-frames, furniture-making and tomato greenhouses businesses discussed in the article. In the rural areas, the worker families had land but no money to work it. There I saw chicken and cattle operations depending on the region. The amount of capital was usually under $20,000. Most of these businesses I saw were in the 1980’s and 1990’s. It seems that many of the so-called undocumented are really the go-getters in their communities. The trip north gave them opportunity and broadened their imaginations. What I recall is that many or most came from the states of Oaxaca, Jalisco, and Sinaloa. We did not have the resources to study these plans; however, our consultant in San Jose followed two hundred of them and reported only one failure. That was a lot better than we saw with California plans. I would not worry too much about flashy pickup trucks, wide screen televisions and new churches. To me this shows some of the families have some surplus income to spend. That is a good sign because that will fuel economic growth. When a person is willing to risk his present and future money, we should not too critical of what he or she buys with the money. If you get more money to the bottom of the economic system, you will get stronger grass roots.


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