The Relationship between the Mexican Economic Crisis and Illegal Migration to the United States by Frank D. Bean and Robert G. Cushing

Official anxiety about undocumented migration to the United States has remained high since at least the mid-1970s. In 1976, for example, more than a decade after the termination of the Bracero Program in 1964, Leonard J. Chapman, then-commissioner of the Immigration and Naturalization Service (INS), testified before a congressional subcommittee that as many as 12 million persons were residing illegally in the United States in 1975. In 1981, President Carter's Select Commission on Immigration and Refugee P olicy (SCIRP) stated that undocumented migration was the country's number one immigration problem. In 1986, Congress passed the Immigration Reform and Control Act (IRCA) in an effort to control undocumented migration with employer sanctions. In 1990, it p assed the Immigration Act, with a provision that established the U.S. Commission on Immigration Reform to recommend changes in all aspects of U.S. immigration policy, including undocumented migration policy. In 1994, six states (Arizona, California, Flori da, New Jersey, New York, and Texas) filed lawsuits against the federal government to recover the costs of providing mandated services to undocumented migrants. Also in 1994, California passed Proposition 187 in an effort to curtail the provision of publi c benefits to illegal immigrants.

The recent economic crisis in Mexico has heightened anxieties even further. The Executive Branch has voiced worries about increased migration in its effort to win political support for loan guarantees for Mexico, and the public at large views the prospect of a rising influx of Mexican immigrants with alarm.

To what extent do such fears reflect reality? Is the economic crisis in Mexico leading to a dramatic upswing in attempts to enter the United States?


Factors Affecting Size of Migration Flows to the United States

A number of factors affect the size of migration flows from Mexico to the United States:

  • economic changes in Mexico;
  • population growth in Mexico;
  • inadequate job creation in Mexico;
  • fluctuations in U.S. border enforcement;
  • changes in U.S. immigration policies; and
  • labor market developments in the United States.

Our current research indicates that less than half the increase in the post-devaluation (i.e., since December 1994) number of arrests (and, by extension, in the volume of flows) can be attributed to the peso devaluation in Mexico; much of the increase derives from labor market developments in the United States. Our research thus suggests that portraying the United States as a country overrun by migrants fleeing the Mexican economic crisis creates a one-sided specter of illegal migration.


Reasons for Heavy Migration

It is instructive to examine some of the factors contributing to heavy migration (both legal and illegal) from Mexico to the United States. These varied and complex reasons involve historical, economic, labor market, and social structural factors. Much ha s been written about how this migration takes place through a social process that is substantially self-perpetuating. When all is said and done, however, there is no gainsaying that the size and persistence of the flows has a great deal to do with economi c and demographic conditions on both sides of the border.

It is no coincidence that the rise of public concern in the United States about Mexican immigration intensified shortly after U.S. wages began to stagnate in 1973. Similar concerns surfaced more recently during a dramatic downturn in California's economy . The pressure to migrate from Mexico stems in part from the fact that the country's population growth (68 million in 1980 to 94 million in 1995) has been so rapid that job creation cannot keep pace (Mexico needs to create over half a million new jobs a year merely to stay even).


What to Do?

One short-run answer, advocated by both the bipartisan U.S. Commission on Immigration Reform in its recommendations to Congress and by the U.S. Congress when it increased appropriations for the Border Patrol in the 1994 Crime Bill, has been

  • to improve border control.

For the longer run, hopes have been placed on

  • achieving more rapid economic growth in Mexico;
  • increasing U.S./Mexico trade, as witnessed by the passage of the North American Free Trade Agreement (NAFTA) in November 1993;
  • delaying the phase-out of Mexico's agricultural subsidies over a fifteen-year period in the NAFTA agreement.

Ironically, most knowledgeable observers agree with the conclusions of the Commission on International Migration and Cooperative Economic Development that increased economic development increases migration in the short run because it provides those desiri ng to migrate with improved means to do so. The presumption behind NAFTA is that long-run economic growth in Mexico will generate sufficient job growth to keep rising proportions of migrants at home. In fact, it was this prospect that many members of Cong ress used to justify pro-NAFTA votes to skeptical constituents. In addition, the immediate elimination of the heavy subsidies to several million farmers could have resulted in a tremendous rural to urban exodus and would have increased (legal and illegal) migration pressures on the U.S./Mexico border.


The Peso Devaluation and Migration

For most of 1994, the scenario of NAFTA-induced increases in trade appeared to follow the prepared script. Then Ernesto Zedillo's new administration devalued the peso by 13 percent on December 20, 1994. Clearly, investors had not believed the Salinas gove rnment's response sufficient to redress problems in the economy. The government quickly lost billions trying to prop up the lower peso and abandoned the policy by December 22. By March 1995, the floating peso had fallen 50 percent relative to the dollar, but in June stood near 6 pesos to the dollar (compared to 3.5:1 prior to the initial devaluation).

Whatever questions this chain of events raises about the many and profound connections between Mexican politics and the economy, the peso devaluation, by raising the peso value of wages earned by Mexican migrants in the United States by about 40 perce nt, increased the prospect that vast new numbers of Mexicans would seek illegal entry into the United States. This was certainly the position taken by the U.S. government, which argued that the failure to provide financial help could result in as man y as 500,000 additional illegal Mexican migrants in the coming year.


Theoretical Contradictions?

These events and the rapidity with which they have occurred expose an apparent contradiction in theories about the effects of economic change on migration:

  • NAFTA-induced increases in trade and economic growth are expected to lead to more migration in the short run.
  • Decreases in trade and the economic decline brought on by the economic crisis are also expected to lead to more migration in the short run.

Seemingly, both good and bad economic news can be expected to generate similar migration effects.

These views are not necessarily contradictory, because each points to different people and processes that are likely to increase migration in the near turn.


Increased Trade, Investment, and Economic Growth

Because Mexico's industrial and agricultural sectors are often inefficient, greater trade, investment, and economic growth in that country increase the pace of agricultural and industrial restructuring in the short run. Unemployment rises because such cha nges involve greater reliance on capital-intensive, as opposed to labor-intensive, production. More than one-fourth of Mexico's 30 million workers still work in agriculture, most on relatively small farms, many heavily subsidized by the Mexican government , and many involved in corn and bean production. In 1994, however, the U.S. price of corn ($95 per ton) was less than half the subsidized Mexican price ($205 per ton). Thus, it is not surprising that econometric models of the Mexican economy predict that hundreds of thousands of rural Mexican workers will leave agriculture in the next few years, a process that can only be hastened by NAFTA because of its liberalization of regulations governing trade in agricultural products.


Decreased Trade, Investment, and Economic Growth

The abrupt peso devaluation and the ensuing economic crisis are also likely to increase flows. Because the peso devaluation raised unemployment in Mexico and increased the peso value of remittances sent back by Mexican workers earning dollars in the Unite d States, it has raised the attractiveness of labor migration to the United States. Although peso devaluations are not unusual in Mexico's economic history, often having been phased in near the end of sexenios (six-year presidential terms) as out going presidents endeavor to put the country's economic affairs on more solid footing before their successors take office, this adjustment did not take place at the end of Salinas's term, perhaps, as some have speculated, because of his behind-the-scenes campaign to win the presidency of the World Trade Organization.


The Effects of Trade Liberalization

Whatever Salinas's motives with respect to devaluation, his prior trade liberalization policies had opened Mexico up to a flood of imported goods and services. Their purchase was financed by borrowed capital, as evidenced by the fact that Mexico was expor ting much less than it was importing. Moreover, Mexico's resulting current-account deficit was now financed differently from previously. Individual capital holders voluntarily, if perhaps over-optimistically, invested in Mexico instead of the government c ontracting external bank debt. Thus, capital holders could also withdraw their funds voluntarily (as opposed to the government's restructuring bank debt), and with sufficient velocity to escalate the crisis.


Capital Flight

As the political uncertainties and fears arising from the Chiapas rebellion in early 1994 and from the assassinations of Luis Donaldo Colosio, the Partido Revolucionario Institucional's (PRI) presidential candidate, and JosŽ Francisco Ruiz Massieu, the se cretary of the PRI, dulled NAFTA's bright economic promise, capital was increasingly withdrawn and the government was forced to use reserves to cover debts, thus precipitating the devaluation of the peso in December 1994. The devaluation itself added to t he country's economic difficulties, and caused a cash-flow problem that might have resulted in default of some short-term debt.


The Impact of the Peso Devaluation

The impact of the economic crisis is beyond any recent experience in the United States.

  • In some Mexican cities, 10 percent of businesses closed in the first two months of the crisis.
  • Over 250,000 workers lost their jobs during the same period.
  • Prices rose 3.8 percent-even more dramatically for some basic necessities, such as electricity (20 percent)-in January 1995 alone.
  • Banks' basic lending rate increased 10 percentage points, to 50 percent, with some businesses paying 60 to 80 percent interest on loans.
  • Credit card rates soared to more than 100 percent.
  • Inflation is expected to top 40 percent during 1995.
  • Unemployment is expected to rise by some 500,000 by the end of summer 1995.

All these developments hit the Mexican middle class as well as the lower classes.


The Economic Crisis and Migration

For the reasons noted above, many commentators expect Mexico's economic crisis to result in a flood of immigrants-both legal and illegal-to the United States. To what extent have illegal flows actually increased because of economic conditions in Mexico? A lthough it is too early to tell for sure, the answer appears to be that Mexican migration flows have indeed increased as a result of the peso devaluation, but other factors have affected the flow even more.

About the only way to gauge changes in illegal migrant flows is to monitor changes in the number of U.S. Border Patrol apprehensions of persons trying to cross the border. Although such apprehensions provide an inexact indication of flows, many observers nonetheless consider their fluctuation a useful guide to changes in flows, particularly if they are adjusted to take into account other factors that affect them besides changes in the number of persons trying to enter the country.

The number of gross apprehensions during the first few months after the peso devaluation was up nearly 40 percent over the same months in 1994. But factors besides the peso devaluation also contributed to this inc rease:

  • lower overall U.S. unemployment rates (from 6.6 to 5.6 percent over the period);
  • appreciably higher aggregate U.S employment from the beginning of 1994 to early 1995; and
  • more hours devoted to border enforcement.

Our research suggests these factors could account for more than two-thirds of the increase in apprehensions of Mexican migrants during early 1995.

Thus, it is inappropriate to portray the peso devaluation as the only cause of the recent increases in illegal Mexican migration. As is almost always the case, calm and objective analysis of the several factors affecting events on both sides of the border suggest the weakness of single factor explanations that seek answers only on the Mexican side.

Dr. Frank D. Bean is an Ashbel Smith professor of Sociology and Director of the Population Research Center at the University of Texas at Austin. Dr. Robert G. Cushing is a professor of Sociology at the University of Texas at Austin.

Welcome Tracking US Trade Directory of Trade Experts Publications Past Conferences Links
Center for the Study of Western Hemispheric Trade
Institute of Latin American Studies
The University of Texas at Austin
Sid Richardson Hall 1.310, Austin, Texas 78712
(512) 471-5551, (512) 471-3090 (fax)
© 1992-2000