As Dollar Falls, Migrants Feel Pinch

Tom A. Peter, Christian Science Monitor, January 29, 2008

Working in the kitchen at a mid-priced restaurant in Cambridge, Mass., Jose Lucas managed to cover all the expenses of his wife and three kids in his native Brazil. But that changed when the real appreciated 60 percent against the US dollar in the past three years.

“I had to get more hours at work so I could send more money,” says Mr. Lucas. “I used to work 40 hours a week. Now, I work 56.” So far, the extra hours have made up the difference.

Across the US, the falling dollar value has sent ripples through immigrant communities that send money to family overseas. As some currencies for developing countries have risen substantially against the dollar, many immigrant workers are increasing their workweek by up to 20 hours or taking second jobs. If the dollar’s slide continues, the US may become less attractive to migrant workers, analysts say.

Although it’s too early to tell whether this will cause a major shift in immigration, a number of migrants in Ecuador, Peru, and Bolivia are already choosing Spain over the US.

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The monthly or weekly payouts provide healthcare, schooling, food, and other items for the migrants’ families back home. “Remittances are the best kind of foreign aid we’ve got,” says Dan Griswold, a trade and immigration expert at the Cato Institute, a nonprofit public-policy research foundation in Washington. “It goes family to family with minimal cut by middlemen.”

Yet the experiences of two other migrants living in Massachusetts illustrate the recent challenges. As a certified nursing aid working near Quincy, Arlene Schwartz has been paying for her sister’s schooling, including college, back in the Philippines. However, the Filipino peso has appreciated nearly 27 percent against the US dollar in the past three years. Her native country has also seen marked inflation.

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In all, about 150 million migrant workers worldwide labor outside their countries of origin and send money home. Last year saw an estimated $240 billion in remittances—a record—reach the developing world, with roughly $90 billion from the US alone. These estimates are probably much smaller than the actual value of remittances, since many immigrants are illegal or send money through unofficial channels.

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While these families are not likely to go hungry, they will probably simplify their diets to subsist on a bare minimum, Dr. Ratha says. They’re also likely to cut back on clothing purchases and limit any medical treatment to emergency situations.

As migrants look to cut costs, some businesses that cater to immigrant needs are starting to feel the pinch. Take Alberto Gomes’s Superior Supermarket, a small Portuguese and Brazilian grocery store in Cambridge. In years past, Mr. Gomes, who is originally from Portugal, attracted a number of area Brazilians by stocking his shelves with goods from Brazil and Portugal. But when the dollar began to fall, the cost of goods soared, and Gomes had to raise prices.

“I do about half of the business [I used to],” he says. Currently, his operation is in the red. “I take it day by day and see how America’s going to do,” he says.

For some countries, however, mainly Mexico, the exchange rate remains favorable, and the economic incentives for working in the US continue. Yet in any case, it can be difficult to draw hard and fast conclusions about remittance flows, given the undocumented status of many people in the migrant workforce, says Simon Reich, director of the Ford Institute for Human Security at the University of Pittsburgh.

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[Editor’s Note: See the AR News story “U.S. Money Helps, Hurts Mexicans” for a fuller picture of how remittance money is spent.]

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