U.S. Immigration Bill: Challenge for Calderon

The Situation at Hand
The new bipartisan immigration bill unveiled in the U.S. Congress last month would provide a dual opportunity for Mexico’s new president, Felipe Calderon, to confront the “brain drain” that is robbing Mexico of much of its intellectual capital. It would also present a good opening for him to restructure the Mexican economy, in order to prevent thousands of poor Mexicans from being lured into working for drug cartels or forced to legally, or more likely, illegally migrate to the U.S. to find a job. Each year, approximately 450,000 Mexicans immigrate to the United States in search of work, where they can earn more in an hour than in a full day in Mexico. This phenomenon comes from an inability of Mexican migrant workers to secure livable job opportunities in their home communities. For example, it is not uncommon for a Mexican worker to be able to secure a full day’s work only one day a week; while in the U.S underground economy; one can almost always secure a full time job, at least as a gardener or bus boy.

The Great Migration Debate
Although Democratic Majority leader Harry Reid withdrew the bill last week after the Senate voted not to move it to a final vote as he had called for, the measure’s militants are still optimistic and vow that the fight is far from over. Their optimism and continued pressure for the bill’s passage seems to be making progress. Thursday night Senator Reid and ranking Minority Leader Mitch McConnell, (R-KY) said in a joint statement the immigration bill would be returned to the Senate floor after completion of the energy bill sometime next week. “The Grand Bargain,” as the pending bill has been named, would require a huge commitment on the part of an increasingly distracted President Bush to convince some of the more skeptical GOP swing senators. Nor is it certain that President Bush managed to do the job at a closed-door lunch with several Senate Republicans on Tuesday, some of whom are still unconvinced that his compromise measure will secure the nation’s border and does not provide an “amnesty” to those illegal immigrants already in the country. The reviewed agreement will address some of these concerns by limiting the number of amendments and include a provision to ensure tighter border security measures in an effort to appease some of the more uncertain conservative Republicans. While the bill is highly controversial, it does have wide bi-partisan support, not only from some Republicans and most Democrats, but also, from The White House itself. Many government officials agree with Commerce Secretary Carlos Gutierrez’s view: “We’ve got to get this through. The status quo is just unsustainable. It’s dysfunctional.”

President Calderon knows that the current U.S. immigration system is broken and that this bill’s successful passage would be a big boost to his personal legacy as well as to Mexico. President Bush noted in his weekly radio address, “Like any legislation, this bill is not perfect. And like many senators, I believe the bill will need to be further improved along the way before it becomes law.” Comments like those by the President reflect his difficult position of trying to appease skeptical, if not rebellious Republican comrades while at the same time insisting that he is a strong supporter of the measure and demanding its passage. As the passage of the bill depends upon winning over the support of upwards of ten conservative Republican senators, Bush needs to step up his role in persuading members that their support is crucial if the legislation is to pass.

Tightening the Border
If in fact the proposed immigration bill becomes legislation, it would tighten the U.S.-Mexican border by securing it with 200 miles of additional vehicle barriers, 370 miles of fencing and 18,000 more border patrol agents. This would significantly reduce the number of foreign workers entering the United States. Even those who did manage to traverse the hostile border environment would find it much more complicated to find work because of the bill’s emphasis on workplace enforcement. For the first time, a bill is adding enforcement to the long held but desultory practice of requiring employers to verify the legal status of their potential employees with the largely illusory threat of harsh punishment for knowingly hiring an illegal alien. Furthermore, the bill would cap the number of temporary workers allowed in the U.S. at 200,000 and would award green cards based on a point system, with their level of education being a distinct factor.

Recognizing that fewer Mexicans will be able to leave the country under the bill, Calderon’s administration will have to take the lead in providing opportunities for those who must seek a better life at home. This was an effort that his predecessor, President Vicente Fox, talked about but rarely got around to undertaking. Calderon can take advantage of the benefits that additional human capital could offer to the Mexican economy. By creating a more positive work environment with higher wages and with constructive competition encouraged, Mexico could reap the benefits of a larger, more productive and better trained work force. Instead of this human capital being outsourced to the U.S. labor market by means of illicit immigration, it will now stay in Mexico. At the same time, Calderon needs to invest in the development of some of the poorest regions in the country like Chiapas, Guerrero and Michoacán. Such initiatives, together with social programs, are certainly within reach since Mexico already has one of the highest per capita income figures-in the $7,000 range-in Latin America.

Changing the Status Quo
Needless to say, the status quo will not be easily changed, and presently, Mexico’s bureaucracy appears content with exporting some of its poorest and most habitually disenfranchised citizens to the United States rather than scurrying around for additional capital to create desperately needed jobs at home. The solution under Fox-to export Mexican workers to the U.S. to find jobs-was deceptively successful over the short run as Mexican officials were wary of taking responsibility for the plight of the disenfranchised segment of the population. This was not a feasible solution in the long run because it did not create permanent employment for Mexicans.

Whatever it has meant for the U.S., the current arrangement has been less than a tangible win-win situation for Mexico. For example, in 2006, Mexican residents in the U.S. sent home over $20 billion in remittances, which served as one of the nation’s largest sources of foreign exchange earnings. However, remittances are not a sustainable solution because they only create the illusion of stability. Ultimately, Mexico must also be able to generate capital to make the necessary investments to improve society as a whole, rather than just through the temporary relief offered by remittances, which benefit only a narrow band of relatives. Remitters send money home to their families directly, which while allowing an impoverished elect to supplement their meager incomes, provide no macro-economic solution. However, as one of the world’s 15 largest economies, Mexico should seize the occasion to modernize its own means of production and stop discarding valuable assets of the Mexican polity to be ground up in the American industrial machine.

Professionals in Mexico
The U.S. immigration bill should draw attention to the problems that trigger the exodus of Mexican migrant workers and professionals in the first place. Mexico’s unemployment rate of 3-4 percent is deceptively low as it has an underemployment rate (those who while employed, are incapable of working sufficient hours to meet their economic needs) of 25 percent; 12 percent of the Mexican labor force and 30 percent of Mexicans holding PhDs reside in the U.S. With the average monthly wage of a business school graduate in Mexico amounting to only $800/month, (perhaps one-tenth of his or her North American counterpart) these professionals have every economic reason to seek occupation relocation elsewhere.

Calderon should view the proposed immigration bill as a great opportunity to insure his popularity among Mexican citizens. According to Mexican Ambassador to the U.S. Arturo Sarukhan, “Too many Mexican citizens leave for opportunities elsewhere and Mexico does not benefit. [Mexico] needs its intellectuals to say home… (The Mexican government) is willing to step up to the plate (to prevent this from happening.)”

Even if the immigration bill is not passed within the time frame of the present U.S. Senate session (which adjourns in August), addressing the root causes of population transfers and making it a top priority of his presidency, will help Caldron avoid the fate of Fox, who spent six years unsuccessfully trying to mitigate the massive immigration trend to the United States. Fox’s inability to secure an immigration accord with his “good friend” Bush was one of the biggest failures of his presidency. Based on Calderon’s recent discussions with The White House, immigration seems to be one of his highest priorities and he has expressed his profound disappointment in regards to Senator Reid’s withdrawal of the bill from the floor, at least for the time being. However, the joint statement annoucing that the bill will be reconsidered along with President Bush’s statement at a speech to the Associated Builders and Contractors: “I call on the senators to pass this amendment and show the American people that we’re going to do our jobs of securing the border once and for all,” gives Calderon renewed grounds for optimism that the immagration debacle can be tackled under his presidency and resolved.

Calderon in the Future
With the majority of his presidential term before him, Calderon has the time to create transparency commissions of scholars and activists dedicated to ameliorating the high levels of unemployment and poverty that plague Mexico. These bodies would be responsible for creating new jobs and evolving a sound employment policy to bridge the income gap, confront monopolies and provide new opportunities for the majority of average Mexicans. Ambassador Sarukham points to Calderon’s plan to implement programs to encourage young entrepreneurs and to create job training programs for those who have completed their education to ensure that Mexican workers become more competitive.

The modestly sized Mexican middle class sector is one of the factors seriously impeding Mexico’s development. The scarcity of well paying jobs greatly contributes to the ongoing Mexican emigration. With an absence of alternatives, many young Mexicans turn to drug cartels or migration for financial survival. According to a government report, in the year 2000, almost half the population lived on about four U.S. dollars a day while at the same time some 10 percent of the Mexican elite controlled over 40 percent of the nation’s wealth. Recognizing this underlying income disparity as a key factor behind the immigration surge will help foster sound development policies geared toward addressing the driving forces behind the immigration surge.

Thus, an important facet of Calderon’s domestic policy needs to be closing the income gap between the U.S. and Mexico. Calderon’s policy will require the political backbone to face up to the influential elites who currently dominate political power in his country, a daunting task in itself. These elites are comprised of privileged businessmen who dominate the benefits of a system of concentrated wealth. For instance, when entrepreneurs tried to import a cement shipment from Russia, the Mexican cement monopoly CEMEX prevented the offloading of the product at a Mexican port. Although Mexico’s federal anti-trust law, the Federal Law on Economic Competition, technically prohibits monopolies, it still tolerates the existence of de-facto conglomerates. For example, current regulations allow Teléfonos de Mexico (Telmex) to maintain a virtual monopoly position over significant segments of the telecom market, resulting in extortionate fees for consumers. Additionally, Mexico’s television market is dominated by TV Azteca and Televisa, the only two national broadcasters. Breaking up these de-facto monopolistic enterprises dominating the Mexican information and entertainment industries will create more jobs by encouraging competition and innovation. Closing this income gap will also require spending money on educational programs and basic infrastructure development that will support a growing and dissatisfied population in impoverished areas-especially in the southern poverty belt-from where many of the would-be migrant workers come. Chiapas, for instance, one of Mexico’s poorest regions, has a literacy rate that is 20 percent below the national average.

Strong Actions and a Harsh Stance
Calderon not only faces pressure for change from the immigration bill, but also from domestic malcontents in Mexico. Fortunately, the U.S. immigration bill, with its combination of workplace enforcement and border vigilance, if passed, would provide Calderon with the opportunity to implement significant economic and social changes. Furthermore, Supporters of Manuel Lopez Obrador-of the left-leaning PRD party-who lost the disputed presidential election to Calderon in 2006 and is an admirer of Venezuela’s President Hugo Chavez, have been gearing up and are prepared to rally for change if the current administration does not take immediate action on its own to address poverty, unemployment and social inequalities. Lopez Obrador’s supporters comprise more than 30 percent of the electorate and are raising the left-wing flag of challenge that is spreading throughout Latin America: they are not a force that can be ignored. Regardless of the outcome of the proposed U.S. immigration bill, it has drawn attention to Mexico’s perilous economic situation and Calderon realizes he needs to implement concrete changes or face an angry and restless populace as his term winds on.

For Mexico to reach its full economic potential and to help create better job opportunities for the majority of its citizens, Calderon must take on the powerful monopolies (both public and private), and the politically protected and favored business groups inherited from the era of the PRI (Institutional Revolutionary Party) rule. The latter is the political party that dominated Mexican politics for over seven decades and was renowned for using fraud and bribery to retain its hold on power. The palpable influence of the PRI on Mexican politics is a hurdle for any reformer to overcome and despite the semi-democratic government; this influence is still a roadblock to the achievement of economic justice, resulting in severe income inequality. Furthermore, the monopolistic entities that perhaps could be defended during the first ten years of NAFTA as providing some protection from U.S. competition are no longer essential, and are, in fact, hurting the economy by hindering constructive and fair competition (as opposed to unfair competition), limiting innovation and contributing to the “brain drain.”

Although the Mexican education system was somewhat improved under the leadership of President Fox, a disproportionate number of the educated individuals have opted to study abroad or are being recruited by entities in other countries. The loss of intellectual capital threatens Mexico’s potential for economic development as society becomes encapsulated in a cycle of ineffectual education often followed by mass migration, leaving Mexico unable to benefit from the intellectual human capital it so painfully has developed. The prominence of monopolies in such sectors as electricity, television and banking, as well as the failure of the government to foster greater competition in the marketplace have resulted in highly restricted opportunities for professionals seeking jobs within the Mexican productive system, as became evident in 2005 and 2006.

Recommendations
Calderon needs to embrace the opportunity presented by the current U.S. immigration debate, as well as look upon the five years that remain of his term as an opportunity to create a new and modernized Mexican economy based on the premise of mobilizing new high and medium paid jobs to keep his best trained workers and professionals at home. Calderon needs to confront the root problems of unemployment and poverty, which have been manifested in the form of immigration and involvement in drug cartels. The growing Mexican economy cannot afford to lose its intellectual capital to foreign countries nor can it afford to have to withstand a social uprising as a result of the continued maintenance of a very unsatisfactory status quo.

President Calderon must show that more market-led reforms can actually work for the majority of Mexicans. Speaking at the 11th annual U.S. Mexico Border Issues Conference on June 7th, Mexican Ambassador Sarukhan stressed, “A boom and bust economy will not suffice, and rather, stable macro-economic policies need to be implemented to lead to economic growth and reform.” Historically, this approach has worked in Chile, whose insightful policies improved the quality of the educational system, and created a new generation of wealth to be distributed more evenly as a result of increased economic competition. After the privatization of the Chilean Electricity Company, ENERSIS in 1983-1987, work-force productivity went up sharply and fixed costs consequently declined on a relative basis. Furthermore, the company’s profits increased, due to efficiency gains. However, this is far from the complete story due to the draconic labor regulation in effect under the brutal Chilean military dictatorship which favored capital over labor and an uneven playing field. By following the more admirable elements of the Chilean model, Mexico can provide its workers with the possibility of identifying with and taking credit for the successes of Calderon’s initiatives, where they work. Embracing the immigration debate by breaking up monopolies and building a fluid yet stable class structure would promote the development of Mexico’s economy by creating jobs in which Mexicans can achieve economic and social mobility within the state rather than trudging abroad. This policy would also help contain the Mexican “brain drain” while finding ways to gradually lure back the country’s professionals, and fight the problem of immigration to the U.S. at its source.

This analysis was prepared by COHA Research Associate Jenna Schaeffer
June 14th, 2007
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