President-elect Obama and Latin America
How will U.S.-Latin America relations change under an Obama administration? This is what I had to say for PBS’s WorldFocus last night.
U.S.-Latin America Relations: A New Direction for a New Reality
After taking a 3 plus month maternity hiatus, I am back and will be posting regularly again.
To kick things off, here is a link to a new Independent Task Force report from the Council on Foreign Relations, titled U.S.-Latin America Relations: A New Direction for a New Reality. The Council brought together 19 individuals of various interest and expertise under the chairmanship of Charlene Barshefsky and General James T. Hill. As director of the project, I can attest to the long hours of intense and at times spirited discussion among its members.
The group decided that U.S. policy should focus on four critical areas: poverty and inequality, public security, migration, and energy integration. The main recommendations are the following:
Poverty and Inequality:
- U.S. should expand targeted assistance for poverty alleviation and institution building by fully funding the Millennium Challenge Account and developing new initiatives to reach the poor regions of the larger middle income countries. These programs should reflect the priorities of Latin American governments and also involve restructuring and integrating the programs of various U.S. government bureaucracies and multilateral institutions.
- Alongside aid, the United States should approve pending free trade agreements with Colombia and Panama and extend trade preferences to Bolivia and Ecuador to encourage productive relations with these complex countries.
Public Security:
- The United States should assist Latin American countries in strengthening their law enforcement and judicial systems. Only through strong institutions can criminal networks and drug traffickers be controlled in the long term. The United States should also focus more on the demand side of the drug equation, working closely with other large drug consuming nations, specifically those in the European Union.
Migration:
- Push through a comprehensive reform in 2009. This must deal with border security, employer responsibility, some sort of regularization of the 12 million unauthorized workers here today, and a flexible guest worker program to deal with future labor demands.
Energy Security:
- The United States should provide FDI incentives to help build energy infrastructure i the region. It should also sponsor regional and subregional working groups to forward best practices.
Finally, the task force touches briefly on 4 bilateral relations. It recommends deepening U.S. relations with Brazil to promote global trade negotiations and manage energy demands; strengthening cooperation with Mexico to stop narcotics trafficking, increase U.S. investment in energy production, and reform immigration policies; using multilateral institutions to address foreign and domestic policies of Venezuela; and opening informal and formal channels of communication with Cuba, with the eventual goal of lifting the embargo.
Future U.S. Policy Toward Latin America
As the primaries proceed, little attention had been paid to Latin America. Given the de facto integration of the Hemisphere through migration, trade, and other links, it is high time that U.S. foreign policy focus more attention on Latin America.
In this interview I lay out four main areas the next administration should focus on to reframe and redirect policy toward the region. These include: energy, public security, migration, and poverty and inequality. It is a tall order, but any progress on these fronts would be welcome after the recent years of neglect.
Investing Remittances
Much is made in policy circles about the role remittances can play in boosting economic development in Latin America. Proponents point out that the over US$60 billion in remittances that return each year to the region is far higher than foreign aid and often higher than foreign direct investment in a country. Yet so far this money has not greatly affected economic growth or economic opportunities at home. Instead, the vast majority of remittance money goes to consumption. Some believe it actually fuels dependency, as more local community members are incentivized or even have to migrate in order to support their families.
While these monetary flows often do lift recipients out of poverty – providing adequate food, clothing, and shelter – they do little to stimulate local or national economic growth through productive investment. And as private money, unlike foreign aid or even FDI, it has been hard for governments to direct this capital into development-oriented projects. How can governments stimulate investment through public policies without hurting these flows?
So far, governments have focused on reducing the costs of transmitting remittances through formal channels such as banks with quite a lot of success. The costs of transferring money abroad have fallen precipitously, allowing migrants and their families to keep more of the funds earned. Also, migrants and their families are beginning to put funds in local and international banks, leading to more savings and investment capital. But these changes, while beneficial, do not in and of themselves increase investment in productive activities in their home communities. The amounts in individual accounts are small, and still used primarily for consumption by local families. In addition, banks often pool these savings from remittance receiving communities and invest them in larger amounts in more attractive loan markets, such as the capital cities in each country. This limits local economic development in the places most starved for investment capital.
Another set of public policies, prevalent in Mexico, involves matching funds for local community investment. Dubbed “3 for 1†programs, migrant groups pool together funds for infrastructure investments – for instance local roads or schools – and the federal, state, and local governments each match a peso. While helping local communities, the actual size of these programs is quite small, estimated at roughly US$70 million in investment last year. Many also question why migrants are funding 25% of public infrastructure for which the state should ultimately be responsible.
Mexico recently announced another pilot program aimed at directing remittances into rural economic development (Houston Chronicle 12/24/07). Unlike earlier policies, this program targets productive private investment. And, it focuses on agriculture, ensuring that these funds go back to the communities of origin of many migrants. While obviously in the initial phases, this incentive structure is promising. It may actually get at the elusive goal of economic development in the hardest hit areas of the national economy – the areas most likely to send large numbers of migrants abroad. If tied to capacity building and technical assistance programs – either provided by the Mexican government, non-profit organizations, or international aid such as USAID – this type of program could become and important step in promoting economic development, and ultimately providing citizens the choice of staying home.
Migration, Aeromexico style
Flying yesterday from JFK to Mexico City on Aeromexico’s afternoon flight, I sat next to a Mexican man in his late twenties. We started talking when he asked me to translate a few words on the English language customs form that were handed out.
He was returning to Mexico “ to a small town in Morelos “ after almost two years in the New York area. The main reason was to see his family: his wife, children, parents, and other relatives. While he never had working papers, during his two years he held jobs in restaurants, hotels, and most recently in a supermarket. He came to the United States with four friends, easily crossing the border, ending up in Los Vegas, flying to Boston, and then making his way down to New York.
He was both happy and sad about his return: happy to see his family after such a long absence, but also sad to leave the opportunities of the United States. He told me he plans on driving a taxi (his family has an extra car) and perhaps studying to get a certificate to join the municipal police or a private security company. But, if it doesn’t work out, he will migrate again to the United States. His employer at the supermarket told him to hurry back, saying there would always be a position for him. If he does return, it will only be for a limited amount of time again, so he can earn more money to help out his family.
His story is similar to that of so many migrants. He doesn’t want to stay in the United States: his home and family are in small town Mexico. But he also is searching for better economic opportunities to provide for his family. He is engaging, like so many others, in “circular migration,” moving back and forth between Mexico and the United States. Yet with the current U.S. migration system, this behavior is becoming increasingly difficult. With no legal means to come, and the rising costs of illegal crossings, many migrants are returning less often and are even deciding to settle in the United States permanently. But this situation leaves no one happy. For the United States millions of individuals continue working and living in the shadows, and for the Mexicans, they remain far from their home.
The Fundamental Flaws of Immigration Reform
With Congress on vacation, immigration reform is on hold. Coming back from their break next week, all sides will be ready to fight, armed with new arguments. In my op-ed in today’s Washington Post, I point out two issues so far ignored: bureaucratic capacity and demographic necessities. Let’s hope on their return Congress adds these fundamental underlying factors to the more expected debates about walls, new visas, and point systems.
Demography enters the immigration debate
The importance of demography for U.S. immigration is finally getting its due. Recent Congressional testimony by Dowell Myers highlights the effects of baby boomer retirement on the U.S. labor market, and the importance of legal migration given these shifts. A recent study by Mitra Toosi at the Bureau of Labor Statistics develops projections for the U.S. labor market in more detail. She adds the interesting fact that not only will baby boomers retire, but women’s participation rates in the workforce have stabilized (at near 60%). That means that unlike in the past, there isn’t a large untapped “surplus” of native Americans to meet growing labor demands.
These calculations contradict many of the responders to my recent op-ed, who question that U.S. demographic shifts will increase our future demand (and need) for immigrants. Often these comments come from self-identified baby boomers that say they don’t plan on retiring at 65.
That may be true. But I doubt the vast majority of them plan to be working at 80. If in fact the baby boomers overwhelmingly decide to postpone retirement, it will only delay, not put an end to, these future labor needs.
The overall trend, as these studies show, is a shrinking workforce and growing dependent population. While immigration can’t solve all of the challenges of this demographic shift, it will be a necessary part of our future if the U.S. economy is to continue to grow, and if many of the amenities we now enjoy in the United States are to remain available.
Immigration number games
Following up on my op-ed in the Los Angeles Times, I talked with Lou Dobbs last night (see transcript) about the issues of demographic change and immigration in the United States. In my appearance and in earlier shows, Lou lays out various numbers regarding legal immigration – saying that 2 million people come into the country each year. But looking at the reports from the Department of Homeland Security (DHS), this 2 million figure is total visas – many of which are for the same person year after year. These are not all new additions to the annual workforce or population. But even if they were, these 880,000 for 2005 (see Table 3 of the DHS report on Temporary Admissions of Nonimmigrants), this is only 0.5% of our current workforce of nearly 150 million people.
The DHS also releases numbers on U.S. legal permanent residents. In 2006 they totaled roughly 1.2 million people (see Table 1). But here too, the vast majority are not new to the United States – new arrivals each year from 2004-2006 averaged roughly 400,000. Thinking again about the workforce, this is about 0.3% of the total.
Finally, Lou focuses on illegal immigration to the United States, saying that 1.5 million to 2 million illegal immigrants come in every year. In depth studies – using U.S. census data as well as other sources – instead estimate these flows as 500,000 a year (see this Pew Hispanic Center study). The DHS estimates a lower 400,000 unauthorized migrants each year (see DHS study).
Migration to the United States is an important subject, and one that should be discussed broadly. But in these discussions, we need to make a serious effort to be as accurate as possible about the numbers we use when defining the issue.
High Tide for Mexican Immigration
I wrote an op-ed for the Los Angeles Times yesterday that has received a fairly strong response (you can find it here).
Many responders – understandably – concentrate on the current effects of illegal immigration: the problem of undocumented migrants for U.S. security, the pressures on schools and other services in areas with heavy migration, and the effects of these new entrants to the labor market on the opportunities for lower skilled Americans.
All of these issues are incredibly important, and are key elements of the national debate on immigration now occurring. But as we discuss these immediate issues, we also need to be considering the medium to longer term dynamics of the labor markets on both sides of the U.S.-Mexican border. There are huge demographic shifts occurring in both of our countries, which will have significant repercussions for labor supply and labor demand, and for immigration, in the coming years.
The U.S. population is rapidly aging, and the first baby boomers are reaching retirement age. Over the next two decades, many will leave the workforce. Many will also need increased health care and living assistance – creating new jobs. The next U.S. generation – Generation X – is much smaller. With fewer native Americans entering an expanding job market (assuming our economy continues to grow), migrants will be needed to fill jobs.
Mexico too has an aging population. While in the 1990s one million new workers entered the working population each year, that number has recently fallen to 500,000. While still a challenge, the Mexican economy will better be able to absorb this smaller number going forward. In the coming ten to twenty years, significant labor surpluses among the young (those most likely to migrate) will decline.
The point is that labor supply and labor demand between our two countries is not a static relationship. It is in fact changing right now. As the nation debates immigration reform, we need to consider these dynamics, and their medium and long term effects. Otherwise, we will potentially be yet again fundamentally revising our immigration policy in just ten or twenty years, as the effects of current demographic shifts materialize.