Remittances: An Underlying Casualty in President Trump’s Immigration Plan

By David Leftwich

Since President Trump’s election, he has released executive orders to regulate immigration. The first executive order that received the most attention banned travel into the United States from six Muslim-majority countries. The next executive order was released on January 25, 2017 and is entitled, “Enhancing Public Safety in the Interior of the United States.” This executive order attempts to rid the United States of “criminal” illegal migrants in the U.S and will likely have a large impact on Mexico. Remittances, or gifts and money sent by migrants living in the U.S. back to Mexico, are an important source of revenue for the poorest people there. In addition, a drastic reduction in remittances will hurt the country’s economic growth.

Mexico is one of the leading remittance receiving countries in the world, receiving $28.7 billion in 2015 from all countries. The other top five remittance receiving countries are India, China, the Philippines, and France. To put this $28.7 billion in perspective, it represented 2.7% of Mexico’s total GDP of just over $1 trillion in 2016.  Because of close proximity and economic ties to the United States, Mexican migrants in the United States are the main source behind those remittances. Out of the $28.7 billion sent to Mexico in 2015, an estimated $25.2 billion came from the United States. In total, the United States is home to about 11 million Mexican migrants, most of whom send remittances back to Mexico. The median amount of money sent is $300 per gift, 14 times a year. This income from remittances is vital to both working migrants in the U.S. and their families in Mexico, especially in a Mexican economy that has seen a shrinking rate of GDP growth over the past two years.

Besides helping out families, remittances also diversify the Mexican economy away from oil. Relying on oil and other natural resources is related to many negative outcomes in developing countries. Energy dependence is correlated with authoritarianism according to Larry Diamond, professor of political science and sociology at Stanford University: “There are twenty-three countries in the world that derive at least 60 percent of their exports from oil and gas and not a single one is a real democracy.” Other negative outcomes associated with resource dependence include slow economic growth rates, inequality, and poverty.

Besides these negative long-term effects, from day-to-day, economies dependent on natural resources are more volatile and fluctuate drastically depending on the markets for their resources. Remittances have been important to reduce this resource dependence in Mexico’s economy, and in 2015, for the first time, money from remittances surpassed money brought in from oil.

This flow of remittance money into Mexico is being threatened by President Trump’s second executive order. The order targets “those that have abused any program related to the receipt of public benefits” for deportation. This includes a variety of common programs, such as Social Security, Medicare, Medicaid, welfare, unemployment benefits, and the Supplemental Nutrition Assistance Program (food stamps). Additionally, the executive order focuses on finding people who have “engaged in fraud or willful misrepresentation in connection with any official matter or application before a governmental agency.”

In order to acquire a job, most illegal migrants need to lie about themselves, whether it is about their citizenship status or social security number. According to Ronald Mortenson, a Fellow at the Center for Immigration Studies, “…approximately 75% of working-age illegal aliens use fraudulent Social Security cards to obtain employment.” Even if it’s not work related, illegal migrants need to lie about biographical information when obtaining basic goods, such as credit cards, in American society. Additionally, if an illegal migrant applies to receive any kind of private healthcare or a government benefit, under the executive order’s broad terms, almost every illegal migrant in the United States will be targeted. While the order was created to help secure the United States against criminals who are in the United States illegally, it gives Immigration and Customs Enforcement (ICE) the authority to deport the majority of working illegal migrants and their families.

The people this order includes are mainly longstanding, contributing members to their communities and to the national U.S. economy. According to the data, most have jobs and are longtime members of their community. The Pew Hispanic Center listed that in 2010, 8 million of the estimated 11.2 million total estimated illegal migrants were in the United States working. Also, 78% of illegals have lived in the United States for 10 years or more, and only 7% have been here less than five years. By uprooting these people, the United States would lose millions of workers, and the Mexican unemployment rate would immediately rise. Because these millions of deported people will be returning to their already impoverished families without a job or the extra income from their jobs in the United States, many families will fall deeper into poverty in Mexico.

The media and President Donald Trump have inflamed the issue of illegal migration, even though rates of immigration into the United States from Mexico have dramatically decreased over recent years, and the population of illegal migrants in the United States from Mexico has decreased from 6.9 million in 2007 to 5.6 million in 2015. This represents roughly a 19% decrease in population size over eight years. Despite this reduction, President Trump is focused on slowing immigration into the United States. He attempted to increase regulations on immigration in his first, “Travel Ban,” executive order, but this second executive order fills a completely different role. Its broad reach deports a group of working, productive members of society under the guise of criminal behavior.

President Trump paints all illegal migrants in the United States as a dangerous group, but in reality, they commit less crime than native-born Americans. According to the 2010 American Community Survey, about 1.6 percent of migrant males aged 18-39 were in prison compared to 3.3 percent of native-born males. There is an issue with illegal immigration in the United States, but broadly deporting established migrants is a counterproductive way to solve the problem that would hurt both the United States and Mexico.

Removing most working illegal Mexican migrants from the United States negatively affects the Mexican economy. As of 2013, 67% of remittances to Mexico were from undocumented migrants. Using this percentage against remittances from the U.S. to Mexico in 2015, President Trump’s plan could eliminate $16.9 billion of the estimated $25.2 billion of remittances being sent to Mexico. In 2016, Mexico’s economic growth slowed to 2.3%. Applying these estimated remittance losses from Trump’s proposed executive order to Mexico’s 2016 GDP would eliminate most if not all of the 2.3% GDP growth in 2016.

Even though President Trump’s executive order is meant to protect the United States from dangerous migrants, its broad language may cause widespread deportations. As an important financial resource for the poor and a diversifying component of the Mexican economy, a multi-billion-dollar reduction in remittances from the United States will have destabilizing economic consequences for Mexico. President Trump should weigh the unintended costs and see whether this executive order’s nominal gains are worth the damages.

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A Coalition For Asian Development

Following the introduction of the UN’s Sustainable Development Goals in 2014 many questioned how such ambitious goals could be met by 2030. The SDGs address, among other developmental issues, the eradication of poverty, hunger and income inequality. In Asia, civil society demonstrates that it can bridge the gap between these lofty goals and their eventual success. According to Nicholas Booth and Beniam Gebrezghi, it is “Precisely because of civil society’s role in representing the interests of the poorest, most marginalized and excluded groups, [that it] seems more urgent than ever before in every aspect of a new agenda which seeks to ensure no one is left behind.”

Over the last 30 years there has been dramatic growth in Asian civil society. Today, the United Nations Development Programme works closely with local civil society organizations on a variety of development projects. In the wake of Japan’s triple disaster in March of 2011 (the earthquake, along with the resulting tsunami and nuclear disaster) for example, civil society organizations played a crucial role in reconstruction and community development efforts. Nicholas Booth and Beniam Gebrezghi again point out: “These civil society groups worked side-by-side with local communities, educators, businesses, local governments, and national governments to help the victims and to get Japan back on its feet.”

More recently, civil society helped rebuild Nepal after the country was devastated by an earthquake in April 2015. With the Nepalese government unable to conduct proper disaster relief, the people of Nepal turned to one another. In June, our blog focused on Nepal and its efforts to rebuild with the aid of international philanthropy. Using Twitter and Facebook, Nepalese citizens were able to arrange rescues, deliver supplies and provide shelter. According to Christian Science Monitor, “Nepal’s response to the [earthquake] was helped by an increase in the number of civil society groups since the introduction of multiparty democracy in the 1990s.” In response, Google has brought back “Person Finder,” a system used after Haiti’s 2010 earthquake to check social media for possible updates on missing persons. Locally based initiatives including Tomnod, a program designed to crowdsource images of structural damage, provided first responders with valuable information.

While civil society is filling the gaps left by other sectors, there is still much that Asian governments can do to encourage third sector growth. China, Nepal and Japan have seen an increase in civil society registrations, but CSOs in other Asian countries are combating increasingly restrictive policies. In Laos, the Ministry of Home Affairs has amended the decree on nonprofit associations (NPAs) and foundations by adding the requirement that groups must notify or obtain permission from the government for funding that they receive from foreign sources. This new policy, which echoes Russia’s infamous “Foreign Agent Law,” can lead to funding delays of up to 18 months and pose significant operational difficulties for programs funded by international philanthropy. The Laotian government’s crackdown on civil society has been downright hostile. John Sifton, Asia Advocacy director of the Human Rights Watch explained the situation, “If a human rights defender like Aung Sang Suu Kyi were to stand up in Laos and speak out against authoritarian rule, she would be immediately arrested.”

These restrictions are, unfortunately, not limited to Laos. In Singapore’s recent elections, the People’s Action Party (PAP) retained its majority in parliament, a position that it is held since 1959. The PAP, positioned as a center right party, has a reputation for restricting the actions of free speech within the city. In March 2015 Amos Yee, a teenager responsible for a video that criticized a former Singapore leader was arrested. Yee was sentenced to 18 months of “reformative training.” Amnesty International was quick to respond: “According to the Office of the UN Commissioner on Human Rights, reformative training is ‘akin to detention and usually applied to juvenile offenders involved in serious crimes’ and was referred to in a recent Singapore district court decision as ‘incarcerative in nature and should be imposed cautiously’.” Limits on free speech have a direct and negative impact on many civil organizations whose intrinsic goals of aiding society often conflict with official government policy.

Without the assistance of civil society organizations, the Sustainable Development Goals laid out by the UN cannot be met by 2030. If Asia’s leaders want to see these goals met, the restrictions on civil society organizations must be eliminated. Asian countries have both the organizational capacity and financial resources to help combat poverty, hunger and inequality, but will they be able to step up to the challenge?

Using Philanthropy and Partnerships to Drive Global Prosperity

by Charlene Chan and Michael French

During a time in which development aid is drastically changing, three experts in the development field convened to discuss the shift of aid away from official government channels to private giving. On April 2nd, the Hudson Institute’s Center for Global Prosperity (CGP), in conjunction with Georgetown University, held an event featuring Dr. Carol Adelman of CGP, Dr. Caroline Anstey of the World Bank, and Dr. Carol Lancaster of Georgetown’s School of Foreign Service. The esteemed panel discussed how philanthropy, remittances, and private capital flows have greatly outstripped official government aid, as well as the implications of these findings for the future of development. Besides being a lively discussion of a noteworthy and important topic, the event also marked the release of CGP’s 2012 Index of Global Philanthropy and Remittances.  Continue reading

Beating the Resource Curse with Oil to Cash Transfers, Part 2

A joint post by Michael French and Laura Esposito

Oil in Libya | Source: The Africa Report and Reuters

The resource curse plagues many nations, partially because it’s difficult to hold leaders accountable for the millions of dollars of oil revenue. However, some countries are making progress. For example, Libya’s new government wants more transparency around the oil sector, suggesting that government contracts will be published online. This, the new government hopes, will encourage Libyans to play a role in the process and potentially benefit from that nation’s large oil reserves. Another option is encouraging the government to use oil revenue for cash transfers to its people, increasing accountability and providing citizens with income to address their needs.

Using oil to cash transfers, championed by the Center for Global Development, the program would essentially take the revenue gained from the oil and put it in the hands of the people. The oil to cash transfer initiative divides a large portion of oil revenue and distributes it to the people evenly. These cash transfers are then treated as income and subsequently taxed by the government, with the taxes creating a stronger link between the people and government activity. Continue reading

Oil’s Slippery Slope, Part 1

A joint post by Laura Esposito and Michael French

Oil is arguably the most important natural resource in the global arena. It brings wealth and poverty, endorses governments and private companies, causes wars and land disputes. Until clean energy takes the stage entirely, oil may as well run the world. And run it does. With oil-centric political decisions made by Uganda, Brazil, and Nigeria, among several others, the race is on for developing countries to capitalize on this black treasure before it becomes obsolete.

What of oil’s role in the development process? With the world’s huge reliance on and consumption of oil, it makes intuitive sense to think that a discovery of oil would be extremely beneficial to a country. For example, the United Arab Emirates and Norway have benefited from oil. After all, oil pays the bills in the short term and also allows countries to invest in long-term projects and more easily transition to other sources of energy. Additionally, oil attracts foreign direct investment because countries without oil need to get it from somewhere. In certain circumstances, especially when solid economic infrastructure already exists, this holds true. But oil often harms less established, developing countries. Continue reading

The Ring, Ring Heard ‘Round the World

A joint post by Elizabeth Eckard and Laura Esposito

Cellphone store in Accra, Ghana | Source: Shaul Schwarz/Reportage for the New York Times

Mobile phones, heralded as a developed country luxury, have changed their (ring)tone.

Mobile phone sales have dominated in recent years: according to the UN, more than 5 billion people have cellular subscriptions worldwide, with 57% of people in developing nations subscribing. More important than the sales, however, are the variety of ways that consumers are benefiting from mobile technology. With entertainment “apps” abounding, those in developing countries have more practical uses for their phone apps. For example, mobile banking (m-banking) has integrated more people into their country’s economies and created new opportunities for disaster-relief cash transfers. Moreover, rural populations are profiting from less time spent traveling to and from markets and urban centers.

In an event at the Center for Global Development, Zap It to Me: Impacts of a Mobile Phone-Based Cash Transfer Program in Niger, Jenny Aker discussed her recent paper on the effects of a mobile cash transfer compared to both a manual cash transfer and a cash transfer where a phone is provided and Zap-enabled. The paper illustrates that the mobile cash transfer, provided to combat the drought in Niger, reduced travel time and costs. In addition, mobile transfers reduce labor costs associated with distributing the transfer and prevent recipients from losing income as a result of picking up their money. Continue reading

What is Counted May Not Count for Much

By Jeremiah Norris – Senior Fellow, Hudson Institute

On January 24, the AP carried an ominous headline: “Fraud plagues global health fund”. The article went on to claim in its lead-in sentence that the Global Fund to Fight HIV/AIDS, TB and Malaria (the GF) newly enforced Inspector General’s office found that “as much as two-thirds of some grant eaten up by corruption”.

In April, the GF published its official response (see “Results with Integrity”), transparently communicating to the world any finding related “to irregular expenditures at the country level – publicize[ed] to date [at] US $44 million in fraudulent, unsupported or ineligible expenditures by [its] Principal and sub-recipients.”

The report goes on to detail the steps being taken by GF to reinforce its fraud detection and risk-management processes, with particular attention to the role of Local Fund Agents and fraud-prone activities at the country level. The GF’s April response is much more fulsome in its sense of institutional accountability than were the public explanations issued by some of its senior managers and blot advocates in January. A Fund spokesman, Jon Liden, commented that “the messenger is being shot … we would contend that we do not have any corruption problems that are significantly different in scale or nature to any other international financing institution.”  A blog supported stated: “Wall Street would be envious of such low levels of fraud and abuse.Continue reading