From the Wall Street Journal:
Latin America Feels Pain Of U.S. Housing Slump
By JOEL MILLMAN
April 23, 2007; Page A2
The slowing U.S. housing market already has taken a bite out of the U.S. economy. Now, the fallout is spreading to Latin America.
That’s because home construction is the principal gateway industry for immigrants entering the U.S. labor market. Those immigrants contribute the lion’s share of the estimated $50 billion in cash sent annually from the U.S. to family members and others in countries south of the border. That tide of cash appears to be ebbing.
Monthly remittances from the U.S. to Mexico have dropped every month since their peak of $2.6 billion in May 2006 — shortly before new-home construction in the U.S. plunged. In February 2007, the latest month for which data are available, remittances to Mexico had slowed to $1.7 billion.
Mexico, Latin America’s remittance leader, may be a leading indicator of a trend unfolding across the continent. In a recent study of 15 Latin American economies tracked by BCP Securities of Greenwich, Conn., all but three showed better than a 90% correlation between the ebb and flow of U.S. housing starts and the swelling and shrinkage of remittances as recorded by the nations’ central banks.
Data showing what appear to be fewer illegal crossings at the U.S.-Mexico border adds to the evidence of a housing-related plunge in remittances. Apprehensions of attempted crossers are down just over 10% during the first quarter of this year from the same period in 2006, according to federal law enforcement. The Bush administration claims the decrease is because of tighter border security. But those on the Mexican side say traffic has slowed for a simpler reason: There are fewer jobs waiting for those who make it across.
The pain of a U.S. housing slump affects people such as Donato Diaz in the tiny village of Santa Gertrudis Zimatlan, in southern Oaxaca state. He returned from the U.S. in 2000 after spending more than a decade building homes in California’s sprawling suburbs. Mr. Diaz used the money he made there to build his own construction-supply store. However, its fortunes depend heavily on cash transfers from Mexicans still working up north to family members here, who use the money to improve their homes.
Between 2000 and 2006, almost 20,000 Hispanic laborers entered the U.S. construction work force in just one occupation: cement mason. Another 72,000 became drywall hangers and 140,000 more as painters, according to figures from the U.S. Bureau of Labor Statistics. The vast majority of these new job holders were foreign-born and crossed the border illegally, according to the Pew Hispanic Center in Washington.
As housing starts slow, recent hires on construction sites are the first to lose their jobs — and the first to warn relatives back home not to bother with a risky border crossing until the job picture improves. How many Mexican workers have lost their jobs? Most immigrants send an average of $1,000 a month back home, and Mexico’s remittances are down by about $600 million, representing earnings from about 600,000 workers.