UPDATE: Within about ten minutes of posting, TWO commentators sent alternatives to Western Union. There are probably some more that I haven’t heard about yet, and which may work better for people sending/receiving remittances.

Does anyone have a good alternative for people who receive “irregular” remittances — say, senders who are helping out in an emergency, or when Tia Chuleta finds a good buy on a one-owner cow? It seems to me (though my much smarter readers may know better) that WU is about the only alternative in those situation.

I’ve got to hand it to Western Union. Their original business (telegrams) having become obsolete, they nicely transitioned to the new economy, and – as the number one cash transfer service – have a fairly decent reputation.

Their prices are high, but they have built a reputation for reliability and honesty that justifies them in the minds of most customers. And – through projects like their “3 for 1” project (WU kicks in three dollars for every one dollar raised by Zacatecans working abroad for small-scale rural development projects) even comes across as that rarity, a socially responsible corporation.

Remittances are not new. Italy, Poland and Ireland all depended on them in the 19^th and 20^th centuries (Ireland into the 1960s), just as the Philippines, along with top recipient India, Russia, China and Mexico do today. The Money Order was invented by the British Postal Service to handle Irish remittances in the mid-19^th century, and they have their place, but in the U.S., with its insistence on privately owned banking/cash system – and the country’s worries about informal cash transfers abroad – Western Union is the only choice.

While some U.S. banks have arrangements with some Mexican banks to handle transfers, banks really aren’t set up for these kinds of transfers. If you’re transferring a few hundred thousand dollars to your drug dealer its not much of a problem, but if you’re sending a few hundred dollars to your Tia Chuleta to buy a cow, it’s a problem. Tia Chuleta may not have access to THE bank with ties to the U.S. bank; Tia Chuleta may not have a bank account at all; and the banks don’t want to deal with Tia Chuleta in the first place. And, it’s the same amount of work for the banks to transfer the few hundred thou as it is to transfer the few hundred, so they really don’t want Tia Chuleta’s business in the first place.

Whatever system is used, the overhead on Tia Chuleta’s cow fund is going to be higher than it should be. I don’t have a good solution, but thought the article in today’s Chicago Tribune nicely covered the problem:

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By Oscar Avila and Antonio Olivo | Tribune staff reporters

NOCHISTLAN, Mexico - The resentment some Mexicans feel toward the money service that has become their lifeline is apparent in a flier making the rounds on both sides of the border. “Western Union, your fees are a rip-off,” it says, showing the image of a masked bandit.

The familiar black-and-gold sign of Western Union is a fixture in Mexican towns like Nochistlan and immigrant enclaves in the U.S., a symbol of the popular yet polarizing mechanism through which workers send remittances to their families south of the border, a flow that totaled $23billion last year.

Now, the complex relationship between Western Union and its Mexican clients has taken another turn as a bloc of Mexican community leaders urges countrymen to boycott the company. Another faction, meanwhile, has teamed with Western Union to launch innovative job-creating ventures in needy towns, including Nochistlan, arguing that the company should be cultivated as an ally.

On one hand, residents in places like Nochistlan are grateful to wire-transfer companies such as Western Union for offering a financial lifeline to isolated places typically underserved by banks. But family members in the U.S. often grouse that the companies charge too much. For a same-day $100 transfer to Mexico, for example, Western Union charges nearly 15 percent.

The growing debate over the role of Western Union has split key organizers of the huge immigration marches held in Chicago over the past two years.

Liberal Mexican activists, including some labor leaders wary of corporate influence, joined the national boycott of Western Union last month. Those critics say the company has a social responsibility to help poor communities where it makes so much money and that its philanthropy lags behind the efforts of other corporations.

In the course of cinematic history, there have been many great quests: searches for the Holy Grail, the Ark of the Covenant, the true nature of Humankind, the essence of God, and, during this film from Chinese director Zhou Xiaowen, a 29-inch television. In Ermo… we follow the obsessive struggle of one woman (Alia) to earn the money to buy the biggest television in her village.

From a College of Wooster (Massachusetts) Chinese Course Description

Ermo is no different than a lot of poor and ambitious campesinas. As the IMDB.com plot summary says:

The independent Ermo supports her son and disabled husband, rising early to make noodles she sells as a street vendor. A snooty neighbor has a TV, so Ermo wants a huge one.

She takes a job in the city, has an affair, sells blood and eventually, she and her elderly impotent husband end up with a TV too big for their house.. and a living room full of neighbors trying to make sense of American football. A cautionary tale perhaps, but is there anything strange about the quest for consumer goods… or a better life? And, Ermo’s justification is that she wants the best for her son who spends way too much time at the neighbor’s watching cartoons.

Wait a minute. What does a Chinese movie have to do with the MexFiles?

Not much other than it’s a great movie I first saw on Mexican television and it has everything to do with remittances. Ermo has a lot of Mexican sisters, who come from Chiapas or Veracruz or Oaxaca to sell their goods in the streets. Perhaps they’re just planning to buy a television (or a computer — TVs having reached even the remotest parts of Mexico long ago), or perhaps she has other goals in mind.

Ermo was not poor in her own village, and the ladies who come to the city to sell a little of everything, aren’t necessarily either. And Mexico is a wealthier country than China. But people are people, and they want better lives… and better stuff.

As Oscar Lewis noticed with Mexico City’s working class in the 1950s and 60s, many country dwellers stay, seeing the benefits of urban life. There’s nothing new in that. When the obsessively curious Lewis began his studies just after World War II, he could sort the wealth of families in given vecinidades by who owned a wrist-watch and who had THE radio in the complex. By the end, he’d stopped counting watches and radios and started counting TVs. Today he’d be counting I-pods, but not cell phones.

I lived for a several months in a cuarto ambulado (rooming house) where the big excitement on my floor was the day one of my neighbors got his own giant TV… and, like Ermo’s, it was too big to fit comfortably in his cramped living space (though — unlike Ermo’s neighbors — we didn’t watch foreign sports. We watched futbol and luche libre).

Ermo herself worked for her TV, but would her desires have been much different if her brother, or husband was working abroad and sending her money? She might still want to buy a TV. The grumps at the International Monetary Fund try arguing that remittances are a “moral hazard” for the recipient, which seems to mean they’ll be tempted to buy a big TV, but who are international bankers to lecture others on morals?

There’s some indication that remittances are a mixed blessing for rural economies. The folks who have them can invest in goods (like Ermo’s 29-inch color TV), but it raises prices for folks who don’t receive remittances. Much of the early criticism of remittances in the U.S. media took the form of collective head-shaking over new pickup trucks and satellite dishes in rural areas. “Why didn’t those people spend their money on schools or better houses?”

They did, but people — poor or otherwise — don’t always make the best consumer choices, and, besides, it could be argued that new trucks meant better transportation, and a satellite dish meant better educational opportunities. Remittance money is invested in the local community, and — according to most studies — at least doubles in value (My brother sends home a thousand dollars, and I buy bricks to build an addition on the house and hire local laborers. The laborers and the brick makers buy groceries and their own TVs. The grocer…and appliance store…).

As I’ve noted before, and as “credible” sources like the Inter-American Development Bank’s Manuel Orozco (”Worker Remittances in an International Scope” 1993, PDF file)

The benefits of migration are significant for both sending and receiving countries. Remittances are one important benefit for immigrant-sending countries.

…

Although there is no direct relationship between remittances and human development, they have an important impact on the economies of receiving countries. Migration and remittances do not necessarily relate to the level of development in a country (not only the poor migrate, nor is migration only from poorer to wealthier countries). Countries receiving remittances come from low, medium and even high human development
cohorts. The connection of remittances to development is related rather to a) the receiving country’s regional economic position and its relationship to a more economically salient country and b) the macroeconomic impact remittances have on the receiving country.

In other words, even a “middle income country” like Mexico benefits from remittances. The U.S. enjoys two benefits — by leaving the country, the money is effectively “banked,” and the “interest” comes back indirectly through Mexican purchases that benefit the U.S. (something I don’t pretend to comprehend), but the U.S. gains lower cost labor at home, and consumers who, being elsewhere, are at no cost (or low cost) to the seller (in other words, grand-dad back in Zacatecas buys his satellite dish from WalMex. And it’s not U.S. taxpayers financing the road that grand-dad drives down to the store, nor your local power plant that is providing the electricity, nor your local hospital that picks up the tab for the uninsured WalMart worker who falls off a ladder getting the dish out of the stock room).

More importantly, remittances aren’t only spent on consumer goods, though sometimes in themselves, they improve people’s lives. A refrigerator means better food — and presumably better health. A computer is … one hopes… educational. Bricks provide jobs for brickmakers and masons. Indoor plumbing benefits a family’s overall health. And remittance funding provides for education, or the chance for higher education.

Better educated, healthier people will earn more and have fewer — and healthier, better educated — children. A win-win-win for remittances.

One of the stupider anti-immigration measures you hear from time to time is a tax on remittances. While there are some costs to immigration, remittances seem to be a benefit. It certainly is for Western Union, which recongizes that remittance investments in Mexico are in their own best interests:

ENGLEWOOD, Colo.–(BUSINESS WIRE)–The Western Union Company (NYSE:WU), a worldwide leader in money transfer services, is expanding its ties to Mexico, meeting with government officials who play a vital role in Mexico’s remittance industry and economic development.

Later this month, company officials will participate in high-level discussions in Mexico City on corporate initiatives and social responsibility. During these meetings, Western Union representatives also plan to announce the expansion of the 4+1 program, an economic and social development initiative in conjunction with Mexican Home Town Associations in the United States (HTAs) and the federal, state and municipal governments in Mexico.

…“Western Union has committed more than a million dollars to the 4+1 program, matching the contributions the HTAs and the three Mexican government levels have provided to support much-needed initiatives in key states in Mexico affected by high levels of poverty and migration. We will continue to set the industry standard, not only for products and services, but for social responsibility and good corporate citizenship.”

Earlier this year and during the initial stages of the program, Western Union helped fund eight projects in communities throughout the State of Zacatecas. These projects included an eco-tourism park, fruit and vegetable processing, nopal farming, agribusiness equipment, a pork farm and a computer assembly plant. In all, Western Union will contribute $1.25 million to these and other projects in five states. During an upcoming trip to Mexico, the company will announce the expansion of the program to the State of Mexico.

It’s a secondary, unexpected benefit. Immigrants are creating their own foreign aid programs. And if some campesino’s kid watches too much TV, so be it.

More than you’d ever want to read about remittances as microfinancing

Speaking of remittances — and added value –we depend on them for essentials like the phone, rent, electricity — to provide you the direct and indirect benefits of reading the Mex Files.