Mexican-U.S. Migration Could Flow Both Ways

In the global economy, Mexico must worry about five primary factors, according to Agustin Carstens, AM ’83, PhD ’85, secretary of finance and public credit of Mexico. Those include the U.S. economy, international migration, domestic economic indicators, major crises, and the development of domestic financial markets. Carstens spoke at the Myron Scholes Global Markets Forum Series, which is sponsored by the Initiative on Global Markets and funded by the CME Trust, at the CME Auditorium in Chicago on May 31.

“The huge mobility of people in North America creates important opportunities between Mexico and the U.S.,” he said. “For Mexico, this has a positive side and a very important negative side, too. We get over $20 billion in remittances annually from the U.S. The bad part is the human part. It is not always a happy event to have so many people leave the country. They usually are people who are relatively skilled. This is an area that can improve and there might be interesting benefits for both countries.”

Important opportunities for Mexico lie in the demographic transition of its very young population into the labor force, the expected population shift from rural to urban areas, and the potential of increasing the number of women in the labor market, Carstens said. Meanwhile, in the next eight years 25 billion Americans and Canadians will retire, creating a scarcity of labor in those countries, he said.

“Right now, the migration debate is concentrated on Mexicans coming to the U.S.,” Carstens said. “We expect that in five or 10 years there might be a very important flow of North American retirees going to Mexico and Central America, especially with the cost of living and health care improving. This can provide a win-win situation for both countries.”

Other challenges surface around the fact that Mexico is a unique country of 32 states with a wide variety of living conditions, he said. “This presents a very important challenge for us,” Carstens said. “It is our hope that through education and social spending, but mostly through infrastructure, we can integrate many remote areas in Mexico into the globalized world.”

The current trends imply that Mexico must fully embrace globalization to compete internationally, take advantage of its higher savings rates and larger work force, create conditions to increase the demand for jobs, and facilitate an orderly increase in the work force among women and urban residents, he said.

“There are many different policy strategies for competing globally,” Carstens said. “Certainly a necessary condition—but not sufficient on its own—is to continue consolidating our micro-framework. We need to make our real economy more effective. We have to allow more competitive conditions in the market. We have to deregulate and in some cases re-regulate some markets. The financial sector, once its working properly, also will provide many opportunities.”

The single change that would make the biggest difference in facilitating the migration of American retirees to Mexico is for Congress to allow Medicare to pay bills in Mexico, Carstens said. “Medicare can establish a standard to certify hospitals in Mexico,” he said. “Right now, it only covers bills outside the U.S. if the nearest hospital is in Mexico or Canada. If somebody is treated in Acapulco, it’s not covered. If that restriction is eliminated, certainly you would have major flow.”

—Phil Rockrohr