LIMITATIONS OF THE INTERNATIONAL REMITTANCES AS A STRATEGY FOR LOCAL DEVELOPMENT Rafael G. Reyes Morales Instituto Tecnológico de Oaxaca Alicia Sylvia Gijon Cruz Universidad Autónoma Benito Juárez de Oaxaca Andrés C. Cruz Contreras Instituto Tecnológico de la Cuenca del Papaloapam Salvador López Platas Centro de Estudios Tecnológicos y de servicios 124 Third Cumbre of the Great Plains Understanding Immigration and the changing communities of the Americas: Lessons from new destinations across the globe. University of Nebraska at OmahaApril 26-29, 2007

Introduction In this presentation Mexico-US migration is analyzed from the perspective of its impact on the development of communities of origin. It is based on eight communities each of which has a high proportion of Zapotec-indigenous people and is economically diverse. Seven of these communities are rural villages and one is a market town which provides goods and services to rural communities. It is addressed the development conditions in rural areas in Mexico and the constraints of remittances as a basis for financing local development.

Frame of reference Studies based on the new economics of labor migration assert that the financial remittances sent from migrants in the US to their households in Mexico have multiplier effects on the communities of origin. (Taylor et al. 2003; Yúnez- Naude 2000; Taylor and Adelman 1996; Sadoulet and de Janvry 1995). Unfortunately, in the case of Mexico and other developing countries there is little evidence to support these claims. In the absence of banks in rural areas remittances do not meet the needs of either producers or consumers. At present, remittances arrive in rural communities and are almost immediately spent in market towns where banks can be found thus only benefiting the town economies. Furthermore, families without remittances usually do not gain access to bank credit.

Frame of reference In the absence of effective redistributive public policies that might correct the negative results of Mexico’s neoliberal development model and the consequences of the North American Free Trade Agreement, people in rural areas have had to create their own strategies so as to secure survival and improve their family’s well- being. The principal strategy is migration to the US which frequently allows migrants to meet not only these goals but also provides financial assistancet that can be used to maintain local cultural traditions (Rivera-Sánchez 2006; Gijón-Cruz, et al. 2000). Migration within Mexico can serve as a further survival strategy but middle-sized cities and metropolises in Mexico are already overpopulated with people from the countryside. As a consequence, around half of the urban population is poor, lives in squatter settlements, and is engaged in the informal sector of the economy (Reyes-Morales 1999; Duhau and Schteingart 1997).

Market towns Oaxaca has preserved the spatial organization of the colonial and pre-Hispanic ages. It is based upon a network of market towns. There are weekly circuits of itinerant markets known as tianguis. In addition, there is a fixed market consisting of specialized stores and services. These market towns provide goods and services to rural communities within their market area and these areas form economically integrated microregions. This is the case of Tlacolula de Matamoros whose market area includes the communities of the Tlacolula valley in the Valles Centrales and many villages of the Sierra Norte.

METHODS A probabilistic survey was carried out to built the social accounting matrix (SAM). This presentation is based on the SAM results of eight communities in the Central Valleys and Sierra Norte regions, Oaxaca State, Mexico. The majority of these SAMs were elaborate through OAXACALIFORNIA project (Reyes Morales et al. 2001) and two SAMs come from graduate theses (Arellano Amaya 2003; Cruz Contreras 2002).

Characteristics of study communities, Oaxaca State, Mexico, CommunityType of economy Migratory intensity index Deprivation index Total population Tlacolula de Matamoros Commerce and services Medium 11,087 San Juan Teitipac Self-subsistence agriculture and crafts. HighVery high2,817 Santa Ana del ValleVery highHigh2,140 San Sebastián Abasolo Small-scale commercial agriculture Medium 1,688 El TrapicheMediumHigh850 San Pablo Macuiltianguis Forestry MediumHigh443 Capulálpam de Mendez HighLow1,298 San Mateo Cajonos Self-subsistence agriculture and crafts High 500 Fuente: CONAPO Índice de intensidad migratoria México-Estados Unidos 2000, México, D.F.; INEGI XII censo general de población y vivienda 2000, Aguascalientes, México; DIGEPO Marginación municipal, Oaxaca 2000, Oaxaca, Oaxaca, México.

RESULTS

Development and the impact of remittances In the first instance, remittances meet the deficit facing rural economies of the Sierra Norte region. Rural economies of the Central Valleys have a greater capacity to produce local production inputs because remittances are also used to finance peasant agriculture, small-scale commercial agriculture, handicraft production as well as housing construction. Remittances have a further impact on a regional level. Housing construction and agriculture generates a demand for local manpower in areas of high migratory intensity. The increase in demand exerts upward pressure on rural salaries. Labor shortages are met by workers from the neighboring communities and even from other regions of Oaxaca where migration levels are not yet so high. Migration has created distinct regional labor markets offering higher salaries to those paid in Oaxaca City, the state capital, for similar forms of employment. In this way, some of the benefits of remittances are redistributed among rural communities.

Development and the impact of remittances As a market town Tlacolula de Matamoros attracts the region’s monetary surpluses and recycles them through banking credits for investment in business and consumption. However, it is clear that the flow of regional, national and international remittances does not represent a source of effective financing for the development of the communities of origin mainly because the huge flow of remittances to market towns reduces the funds available to other areas.

Structure of the gross production value. Two communities with timber economy, Sierra Norte region, Oaxaca State. Economic activity Capulálpam de Méndez 2002 San Pablo Macuiltianguis 2000 Agriculture4.6 %11.4 % Back-yard livestock3.3 %5.1 % Commerce and services70.0 %83.5 % Manufacture and crafts5.5 %0.0 % Enterprises16.6 %0.0 % Total100.0 % Fuente: Cruz Contreras, Andrés C La construcción de la matriz de contabilidad social aplicada a Capulálpam de Méndez, Oaxaca y su utilización en el diseño de política económica regional, tesis de doctorado, UACH, p. 76; Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, p.51.

Structure of the gross village product. Two communities with timber economy, Sierra Norte region, Oaxaca State. Economic activity Capulálpam de Méndez 2002 San Pablo Macuiltianguis 2001 Value added (gross domestic product) $ 5,241,174 (40.7 %) $ 388,630 (28.0 %) Imported inputs $ 6,673,232 $ (51.7 %) $ 762,662 (55.0 %) Local inputs $ 736,269 (5.7 %) $ 77,928 (5.6 %) Government $ 244,248 (1.9 %) $ 158,028 (11.4 %) Total $ 12,894,923 (100.0 %) $ 1,387,249 (100.0 %) Fuente: Cruz Contreras, Andrés C La construcción de la matriz de contabilidad social aplicada a Capulálpam de Méndez, Oaxaca y su utilización en el diseño de política económica regional, tesis de doctorado, UACH, p. 78; Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO- CEE, COLMEX, Oaxaca, Oax., México, p.51.

Households’ incomes at current prices. Two communities with timber economy, Sierra Norte region, Oaxaca State. Economic activity Capulálpam de Méndez 2001 San Pablo Macuiltianguis 2000 TotalPercentageTotalPercentage Total income$ 19,493,463$ 2,181,490 Local income$ 5,306, % $ 388, % External income$ 14,186, % 1,792, % Fuente: Cruz Contreras, Andrés C La construcción de la matriz de contabilidad social aplicada a Capulálpam de Méndez, Oaxaca y su utilización en el diseño de política económica regional, tesis de doctorado, UACH, p. 80; Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO- CEE, COLMEX, Oaxaca, Oax., México, pp.48-9.

Structure of the gross production value of three communities with peasant agriculture and craft production, Central Valleys and Sierra Norte regions, Oaxaca State, Economic activity Santa Ana del Valle San Juan Teitipac San Mateo Cajonos Agriculture8.2 %14.6 % 3.7 % Back-yard livestock7.6 %12.5 % 2.5 % Commerce and services25.6 %52.3 % 52.0 % Crafts58.6 %20.6 % 41.8 % Total100.0 % Fuente: Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, p.51.

Structure of the gross village product, three communities with peasant agriculture and craft production, Central Valleys and Sierra Norte regions, Oaxaca State, Economic activity Santa Ana del Valle San Juan Teitipac San Mateo Cajonos Value added (Gross Domestic Product) $ 4,862,708 (64.8 %) $ 3,969,520 (60.9 %) $ 1,815,329 (34.1 %) Imported inputs $ 1,738,759 (23.1 %) $ 1,189,330 (18.2 %) $ 2,293,022 (43.1 %) Local inputs $ 631,166 (8.4 %) $ 814,811 (12.5 %) $ 849,546 (16.0 %) Government $ 275,758 (3.7 %) $ 545,246 (8.4 %) $ 362,539 (6.8 %) Total100.0 % Fuente: Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, p.51.

Households’ incomes at current prices in three communities with peasant agriculture and craft production, Central Valleys and Sierra Norte regions, Oaxaca State, Economic activity Santa Ana del Valle San Juan Teitipac San Mateo Cajonos Total income$ 8,122,595$ 8,402,470$ 3,590,092 Local income $ 4,862,708 (59.87%) $ 3,969,521 (55.7 %) $ 1,815,329 (40.9 %) External income $ 3,259,887 (18.3 %) $ 4,432,949 (44.3 %) $ 1,774,763 (59.1 %) Government $ 275,783 (8.46%) $ 545,246 (12.30%) $ 362,539 (20.43%) Fuente: Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, pp.48-9.

Structure of the gross production value of two communities with small-scale commercial agriculture, Central Valleys and Sierra Norte regions, Oaxaca State. Economic activity San S. Abasolo 2000 El Trapiche 2001 Agriculture8.4 % 2.07% Small-scale commercial agriculture7.7% Back-yard livestock3.8 %2.01% Manufacture0.0%72.86% Commerce and services80.1 %23.06% Total % Fuente: Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, pp.50-1.

Structure of the gross village product of two communities with small-scale commercial agriculture, Central Valleys region, Oaxaca State. Economic activity San S. Abasolo 2000 El Trapiche 2001 Value added (Gross Domestic Product) 46.0% 24.2% Imported inputs26.5 % 73.5% Local inputs17.3 % 1.3% Government10.2 % 1.0% Total100.0 % Fuente: Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, pp.50-1.

Structure of the major economic indicators of Tlacolula de Matamoros, a market town, Central Valleys region, Oaxaca State, Fuente: Reyes Morales, Rafael G. et al Impacto de las remesas internacionales en el desarrollo de las localidades expulsoras de población en Oaxaca, México, ITO-CEE, COLMEX, Oaxaca, Oax., México, pp Economic activityGross production value Gross village product Households´ income Agriculture 0.3 % Back-yard livestock 0.5 % Manufacture 1.9 % Commerce and services 93.3 % TOTAL 100 % Value added (Gross Domestic Product) 66.1 % Imported inputs 11.4 % Local inputs 15.7 % Government 6.8 % TOTAL % Local income 47.5% External income 52.5% TOTAL 100%

Conclusions Constraints facing the local development. The absence of micro-level financing institutions in rural communities does not permit the recycling of remittances before they reach market towns. The economic dependency of the Sierra Norte communities is partly due to the fact that these remittances are not invested. Nonetheless, communities of the Central Valleys have reduced their deficits considerably within the region and their labor force is seasonally engaged in the regional labor market.

Conclusions Regional deficits could be reduced if production surpluses were increased and the sources of income were diversified. In the Central Valleys, rural communities have diversified their income sources through the following activities: 1) 1) cultural and alternative forms of tourism; 2) 2) investments in small business and handicraft production; 3) 3) housing construction; and 4) 4) exports of traditional products to the Latino market in the United States. In la Sierra Norte, communities have other economic initiatives: 1) 1) Sustainable timber production. 2) 2) Ecotourism and purified water production. 3) 3) Fruit and flower orchards, trout farming and small-scale bread production.