As Dollar Falls, Migrants Feel Pinch

By Tom A. Peter
The Christian Science Monitor

Tuesday 29 January 2008

Their earnings don't stretch as far for family overseas, so many are working extra hours.

Cambridge, Massachusetts - 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.

"You'd be hard pressed, if you don't already have close relatives in the United States, to make a rational case, if you're in those countries and thinking of emigrating, to come to the United States," says Donald Terry, a senior official at the Inter-American Development Bank. "The clincher would be: Do you want to send home $300 or 300 euros?"

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.

"Because the dollar kept going down and college is more expensive, I had to send more money. $200 became $500," she says. Sometimes Mrs. Schwartz, who also sends her family large packages of food, has worked 24 to 32 hours of overtime a week to comfortably make up the difference.

Four years ago, Ricardo Machado, a Brazilian who lives in Allston, could support his daughter, his sister-in-law, and her three children with only $650 a month. Today, the regular payment has jumped to $1,200. Aside from working an additional 20 hours a week, he has had to cut virtually all luxury expenses. "I used to come to [a local Brazilian restaurant] twice a week, but I had to stop," says Mr. Machado, who has a full-time position at a car dealership and also does odd jobs.

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.

The greatest effects of the remittance strain will strike lower-income families overseas who depend on the money for survival. "A 20 percent hit for a rich man is probably tolerable ... but for poor people, a 20 percent income hit is a very big hit, and they would be hard pressed to adjust to it," says Dilip Ratha, a senior economist at the World Bank who specializes in remittances and migration.

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.

"The vast majority of money is going to migrants' families in Mexico and Central America," says Dr. Reich. "This means that the vast majority of migrants have not been affected by [the falling dollar value]."

Ratha, however, foresees changes if the US economy continues to struggle. "There will be in a year, [or several] years' time, effects on migration patterns ... that will probably span the whole spectrum from high-skilled to low-skilled workers," he says.

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