Why didn’t Mexico implode? That may be one of the biggest economic mysteries left in the wake of COVID-19. Mexicans weathered a disproportionate blow: By the first anniversary of the pandemic, Mexico had suffered the second highest rate of excess death in the world, trailing only Armenia.
The government of President Andrés Manuel López Obrador did little to mitigate the suffering. It executed the tightest budget in Latin America in 2020 and then trimmed spending in 2021. “The support in response to COVID-19 was notably less than that of emerging market (EM) and regional peers,” noted the International Monetary Fund in its 2021 assessment.
A study by researchers at Tulane University about COVID’s impact on Latin America’s four largest economies found that social assistance was expanded to offset the shock to poverty and inequality in three of them. The exception? “The offsetting effect is nil in Mexico since no expansion of social assistance took place in the country,” they wrote.
Still, Mexico didn’t implode. Indeed, after four years in office, López Obrador is more popular than his four immediate predecessors at the same point in their presidencies. Three years from the start of the pandemic, an explanation for the mystery is emerging from the broader story of the virus-borne disaster and its aftermath: Mexicans were saved by their people in the United States.
As the administration of President Joe Biden struggles to develop an effective holistic response to the swelling movement of migrants from across the hemisphere to the U.S. in search of a better life, it would do well to keep this economic reality in mind.
Remittances sent by migrants to their relatives in Mexico rose by over 10% in 2020, to $41.5 billion, according to data from Mexico’s Central Bank. They surged by 27% in 2021 and 13% in 2022, to a total of $58.5 billion. That is equivalent to more than 60% of Mexico’s total public social spending in 2019, the latest year it reported to the OECD.
This surge of remittances is, in fact, also a bit of a mystery. Hundreds of thousands of Mexican immigrants lost their jobs when the pandemic hit, forcing businesses to close across much of the U.S. The unemployment rate of foreign-born workers jumped to 16.5% in April 2020, from 3.6% in February.
The money kept flowing nonetheless. In part, that’s because the American safety net stepped in. The massive expansion of government assistance in the U.S. — between the CARES Act from March 2020 to the American Rescue Plan of March 2021 the federal government deployed a mind-boggling $5 trillion in emergency aid — also provided a net for migrants’ families back home.
The U.S. government knows that migration policy must take into account the forces driving migrants from their homes. Back in the day Nafta was sold, in part, as an economic stimulus designed to keep Mexicans in Mexico. As Ross Perot continued to fulminate about the “giant sucking sound” of American jobs moving south, President Bill Clinton chose to focus on American fears about Mexican workers moving north.
The Biden administration’s Strategy for Addressing the Root Causes of Migration in Central America is all about plugging migration at its source. The U.S. is even providing some money to help it along: Last year it gave $240 million to Guatemala, $150 million to Honduras and $108 million to El Salvador, to fund projects in health, education, economic development and the like.
A quick comparison illuminates one weakness of this strategy. According to research from the Inter-American Dialogue, remittances to Guatemala surpassed $19 billion last year. Honduras received nearly $9 billion and El Salvador just under $8 billion.
Remittances to these countries play an even bigger role than in Mexico to keep society afloat. For instance, El Salvador’s take last year amounted to a whopping 27% of the country’s gross domestic product, according to estimates from the Inter-American Dialogue, and were more than three times the government’s social spending in 2019. The numbers are also staggering in Guatemala and Honduras. Remittances to Mexico, by contrast, amount to less than 5% of GDP.
This does not mean, of course, that Washington should provide comparable amounts to keep Central Americans in Central America. But the comparison should help bring into focus the scale of opportunity that migration provides to the migrants, and their families and communities back home.
Whatever sense it makes for the U.S. to address insecurity, corruption and lack of opportunity in Central America’s Northern Triangle, policymakers must pay a lot more attention to what migration means to those who embark on the journey from their homes there. That will entail thinking less about border controls and more about how immigrants incorporate into and benefit from the opportunities the U.S. economy offers.
The core thing to understand is that the opportunities are immense, gargantuan. The surge of remittances in the COVID era underscores how immigration provides the best shot, bar none, at raising the incomes of millions of people across the developing world. Don’t waste too much time trying to figure out migration’s “root causes.”
A study a few years ago by researchers at the Center for Global Development, Harvard’s Kennedy School and the World Bank estimated that a Guatemalan worker could increase his wages 3.1 times by working in the United States. A worker in Mexico would boost wages by a factor of 2.35; a Haitian, by 7.8. A 35-year-old Peruvian man with nine years of schooling working in the formal economy in Peru made an average of $452 a month, they estimated. Working in the U.S., he would make $1,714.
Yes, immigration is, to put it mildly, a politically touchy subject in the U.S. Its most vociferous opponents, those who scream loudest about a border overwhelmed, will discount these gains as irrelevant. After all, they accrue to non-Americans who may not even speak English.
They might consider how the U.S. actually needs migrants too. It needs them to stabilize the population and stop the workforce from shrinking; to harvest the crops and deliver the meals; to take care of the kids and change the bedpans of the old.
During the pandemic, remittances from the U.S. provided an indispensable lifeline to communities across Mexico and Central America. But Americans might want to remember how, at the height of the pandemic, it was migrant workers who guaranteed the availability of food.
Such recognition may not provide a blueprint for responding to large flows of migrants heading toward the U.S. But dealing with them effectively requires first acknowledging the true economic drivers moving people from their homes. It requires being at least a little grateful for a steady supply of food. And to be thankful that Mexico didn’t implode.
____
ABOUT THE WRITER
Eduardo Porter is a Bloomberg Opinion columnist covering Latin America, U.S. economic policy and immigration. He is the author of "American Poison: How Racial Hostility Destroyed Our Promise" and "The Price of Everything: Finding Method in the Madness of What Things Cost."
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
