L économie politique, science sociale et/ou outil de politique économique?

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1 Troisième congrès de l AFEP 3, 4 et 5 juillet 2013, Bordeaux L économie politique, science sociale et/ou outil de politique économique? Workers and Entrepreneurs: The Experiences of Mexican Migrants to US EUGENIA CORREA Mexico National University correa@unam.mx ALICIA GIRON México National University alicia@unam.mx Abstract For decades the Mexican migrant experience to the United States has not only generated large flows of people, savings and capitals; also created families and businesses across borders. This paper presents some results of research on crossborder business experience and developmental processes, conducted through interviews and surveys the three major cities with population of Mexican origin in the United States: Los Angeles, Chicago and Houston. One of the findings shown in this paper is that the configuration of cross-border business networks has been much more dynamic than the necessary institutional and financial support. The analyses of all these experience open new perspectives for public policies for both governments, more focused on institution building for prosperity on both sides of the border.

2 Introduction The presence of Mexican entrepreneurs as economic agents in the United States grew within the last decade. They may be noticed mainly because of the recurrent economic crises and the economic cycle between Mexico and the United States. There are three characterizations of the Mexican entrepreneur in the United States. The first respond to the growing number of powerful Mexican entrepreneurs whose enterprises, like Bimbo and Cemex, expanded to an international level. The second are immigrant Mexicans whose involvement in business culture made possible for them to become entrepreneurs in the United States; and the third is the fact that Mexican entrepreneurs immigrated to the neighbor country because of economic, political, and social reasons during the last six years presidential period. The analysis in this paper will go further and will deal with the way in which Mexican people and their enterprises had the possibility to establish and get involved in entrepreneurial culture outside our frontiers; the aim is to have a deeper knowledge of the financial services they used in order to become entrepreneurs. Through time, neighboring countries relationships have been developed and characterized by a sui generis market with a high potential for both economies. It is important to know that the financial services they used in order to establish their businesses and their different commercial activities are related. There are very few studies about Mexican entrepreneurs in the United States. From the information obtained through census data, a survey, and more than a hundred interviews, the outstanding factor was the use of financial services by this emergent class in cities like Los Angeles, Chicago, Houston and San Antonio. There are interesting results through the used methodology that allow observing important characteristics which contrast with the period before and after the Lehman Brothers bankruptcy. It is not only the environment in which the crisis developed, but also the impact in Mexico, as well as the uncertainty in which Mexican entrepreneurs of the borderline area, and other places of the country, live in. This analysis will be made through different economic and sociological variables. The kind of business that Mexican have and the time it took for them to locate in the United States, show that their social class, education, and family history are influential factors in whether they have a successful business or not. On the other side, it is still questioned if entrepreneurs remittances are useful to create productive projects in their city of origin. This also questions the incapability of creating positive economic policies in Mexico for new enterprises, as well as the failure of financial policies that allow credits for development of bi-national businesses. 1. Immigration and Recurrent Crisis: a Historical Context The study about Mexican immigration to the United States could not be possible without consulting studies such as Durand (2005), García Zamora (2002 and 2005),

3 and Delgado Wise and Knerr (2005), since part of our emigrational history existed even before Mexico was an independent nation. United States and Mexico are two countries whose foundation begun with the movement of two great empires: through the conquest of the Spanish Empire towards the appearance of the first enclaves of the British Empire. This set the rules for monetary and economic relations between both neighboring countries, which cultural and economic origin was determined by their insertion in global market. Both nations limits established political borders in a space where economic and social limits slowly blurred until creating a geo-economics multicultural space subsumed, until today, between two distant neighbors with different development processes but still dependent of each other. In what refers to migration, different multidisciplinary and trans disciplinary points of view entwine. When it comes to Mexico is not recent, as Durand (2005) points out. Mexico got involved in massive immigration ever since the last years of the nineteenth century: Mexico is a country of immigrants, but is not known as such. Part of the reason why the latter is not recognized, has to do with the lack of a national conscience, which relates to two factors: the vicinity context and the unidirectional pattern. [ ] For Mexicans in the United States- the going back alternative has always been present. Mexican emigrants did go back to their country: for the holidays, for a funeral, to supervise their businesses, or even for a football game, Durand (2005:15). Mexican migrant entrepreneurs maintain related to their origin country, their families, and friends; in fact 74.4% of our interviewees asserted that they still travel to Mexico. The relationship with Mexico is still very close. When referring to Mexican entrepreneurs, the emigrational present situation is different to the rest of their fellow countrymen. Firstly, although many workers are still illegal Mexican emigrants, the majority of Mexican entrepreneurs are not only American citizens (42% of our interviewees) but also bi-national. This has allowed their businesses to be even more successful. Secondly, 21.6% of this entrepreneurs are residents, and thirdly, the rest of this entrepreneurs, that is the 19.3% have a business visa. Immigration concerning Mexico and the United States is part of a growing historical process of integration in North America. This process acquired a new impulse with the North American Free Trade Agreement in With this agreement, the barriers of goods, capital, services, and information circulation were reduced. But labor was not included in it and the United States did not look for, until before the economic crisis, integrating labor markets of both countries. Since restrictions for Mexican labor were not modified, the United States militarized the border and adopted new restrictive policies for emigrants provoking the marginalization of their human, economic, political, and social rights (Massey, Durand, and Malone, 2003). In 2013 the need of an emigrational reform, during the beginning of the second period in the government of president Obama, has been posed.

4 Therefore, immigration from Mexico to the United States is defined by the economical cycles and the expansion of economic development in both countries. During the last years of the nineteenth century and until the 1929 crisis, Mexican immigration was a very important factor for the construction of the industrial development in the neighbor country. A great Mexican explosion, because of the great crisis, entwined with industrial development in Mexico during the 30 s and up until the post war period (Carreras, 1974). The imports substitution model widened the demand for labor force, which moved from country to town until before the 70 s. The stability of the exchange rate and a strong State permitted to extend the intern market and the growing rates of the GDP were sustained. This has been called economic miracle. Afterwards, the breaking of monetary agreements of Bretton Woods, and the deregulation as well as the economic and financial liberation, set the foundations for a whole period in Mexico, characterized by severe and recurrent economic crises for over forty years. The devaluation of the peso facing dollar in 1976, the external debt crisis in 1982, and the banking crisis of 1994, took to enterprises bankruptcy and the departure of numerous Mexican people to the neighbor country. The growth rate of immigration during the nineties rapidly grew and as a consequence, the fluidity of Mexicans external capital sent to their families was outstanding and occupied the third place worldwide after China and India (United Nations, 2012). Capital fluidity, considered as remittances in the scale of payments, was in second place after oil in our country. Currently, United States recession is having a severe negative impact in Mexico and Central America s economy, not only because migrants are incapable of finding a job (in construction, agriculture and the services sector), but also because many have returned voluntarily and others returned whether they wanted or not (Grabel 1, 2012). Ever since the Lehman Brothers remittances diminished, but are still a very important factor in what refers to family income. The rapid expansion of immigration lies, without a doubt, in the economic policies and the implemented measures beginning in the nineties and up until the present day. Undoubtedly the recurrent crises in our country mark the age in which current Mexican entrepreneurs in the United States emigrated. When observing that most entrepreneurs interviewees have (32.2%) an average age of 36 to 45 years old. They are young entrepreneurs who arrived and adapted to American culture, language and who understood how to make businesses in an unknown country. If the decade in which they arrived to the United States is considered, the highest percentage (25.8%) corresponds to the nineties. That is to say, older emigrants were turning twenty when arrived to the United States, and younger ones were teenagers or children. Definitely the external debt (1982) and the austerity plans, as well as the three great renegotiations of the first during the eighties and, afterwards, 1 At present, the recession in the United States is having a serious, negative effect on the economy of Mexico and countries in Central America, not least because migrants from the country are unable to find employment (in construction, agriculture, and the service sector), and many have returned home voluntarily, whereas others have been returned forcibly.

5 the banking crisis (1994) mark a period that lasts almost two decades. Only during 1995, the drop of the GDP was almost a 7%, which is a severe economic precipice. The impact after the crises of 1982 and 1994 that goes from the lost decade to the hope decade, was serious on Mexican economy. The cyclical character of immigration to the United States happened mainly within the eighties and the nineties. GDP s constant falling during those years, did not exceeded similar average remittances in Latin America during the first decade of this century. 2. Mexican Entrepreneurs in the United States Before and After the Lehman Brothers Mexican entrepreneurs in the United States have two main characteristics. Firstly there are those who became entrepreneurs because of the knowledge they had before and took the risk of starting a business. Many of them are part of the nostalgia market. And secondly those who, to face each crisis, emigrated and moved their businesses to different neighboring cities. Separately from the reasons why they emigrated and how they became entrepreneurs. They are characterized by being innovative and by their lack of fear when it comes to risk. One could frame them with the Schumpeterian definition. Innovative entrepreneurs who know the business, are adapted to the American business culture, and bet for the financial risk of the business. Men and women, who got involved in business, were risking their capital in different sectors of American economy. Part of their income was to be sent to their families, and another part was reinvested in their own business. It might as well be said that Mexicans, up until before the great economic crisis of 2008, had buoyant businesses. In the beginning, the crisis was characterized as a subprime crisis (Girón y Chapoy, 2011), but as it developed into a generalized worldwide crisis, it had a severe impact on Mexican economy. During the post-crisis period, businesses suffered great losses; earnings diminished, they were bankrupt and, others, used their family s support or personal savings in order to recover. The Lehman Brothers crisis affected productive and financial circuits because of the lack of credit to keep the businesses. Not everything was dark. Many entrepreneurs did manage to overcome the crisis through the weak recovering of the North American crisis some months after. New businesses started and strengthen through social networks, mainly formed by Mexican entrepreneurs who live in cities like Los Angeles, Chicago, and Houston. Through Mexican white neck businesses migration mainly from Tamaulipas and Nuevo Laredo, one may observe one of the strongest consequences of the crisis. This wave of Mexican business migration remained on parallel cities such as Houston and San Antonio. The impact of the United States recession in Mexican economy was accompanied by a growing wave of uncertainty and social violence towards entrepreneurs, and was materialized in entrepreneurial kidnapping and Mexican justice s impunity to face all the violent fighting among groups who were dedicated to financial circuits of criminal economy.

6 From a series of surveys and interviews made in Houston and San Antonio, one may observe a wave of prosper Mexicans whose capital needed to establish not only in these cities, but also in other countries in which they were supported by social networks and by economic policies created by the Mexican government. Thus, the government s ( ) export program (PROMÉXICO) supported many Mexican entrepreneurs who had recently became residents in the neighboring cities, not only to promote their businesses in the United States, but also looking to strengthen binational enterprises. 3. Characterization of Entrepreneurial Activities of Mexican in the United States The characteristics of the most important activities of Mexican entrepreneurs in the United States can be spotted through different economic and sociological variables. The sectors in which Mexican entrepreneurs concentrate are those of temporary accommodation and gastronomy (such as restaurants); this sector represents a 31.9% out of the total economic activity. This fact represents the great amount of Mexican food restaurants whose owners are Mexican. In second place, small-scale market represents the 18.7% out of the total, and in the third place there are professional scientific, and technical services representing the 14.3% out of the total. This ends with the myth about the professional practice of the Mexican since it is frequently thought that Mexicans have a poor education. Which at the same time modifies the idea that emigrants are not educated. A great percentage of Mexican entrepreneurs are professionals and practice their profession in the United States. On the other side, women alone are the most representative element within the temporary accommodation sector and the gastronomy sector representing a 12.5%, while men represent the 18.7% 2. There is great relation between migrant Mexican enterprises and the fellow countrymen. The 88.9% of our interviewees sells to the fellow countrymen market, the 74.2% employs persons who are also relatives, and the 69.7% uses Mexican suppliers. This shows that the relationship between them is not only cultural but also for business. Most enterprises among these Mexican migrant entrepreneurs that have from 0 to 10 employees represent the 72.1% of the total. That is, those are small businesses. The growing immigration has created cultural consumption patterns towards the establishment of a characterized market, which takes further the fact that they are an established and strong community through cultural links, and that makes the economic force of this market a very important one. Most of the capital that our interviewees use comes from the United States (82.2%). That is, Mexican emigrants working in that country, were generated the capital. Only an 11.1% took their capital from Mexico. The resulting capital from working in the United States and Mexico represent only a 6.7%. The capital with 2 Chart 5, SPSS data base

7 which these enterprises started, 62.2% of the total, comes from the immigrants savings, while loaning represent the 14.4% and both (savings plus loans) is the 23.3%. The lack of financial culture has its roots on the Mexican financial system, which may be recognized through its high interest rates, and has been transported to the culture of a great part of Mexican entrepreneurs in the United States. Therefore, most of the capital is from savings and not from loaning. Distrust and lack of knowledge of the Mexican and American financial system is what resulted into the latter. Also it is very complicated to get a credit. This shows that financial culture is mainly weak since entrepreneurs do not easily get access to credit; instead, they save money of their own in order to be able of starting their business or enterprise. Where are entrepreneurs from? Most of them come from Jalisco, that is, 17.8%; followed by the Distrito Federal with a 16.7%, and lastly, there is Zacatecas with a 12.2%. If Mexican migrants children born in the United States are considered, Los Angeles is in the first place with the 4.4%, in the second place is Chicago with a 3.3%, and in the third place is Houston with a 2.2% 3. If the gender of the entrepreneurs is considered, most women are form the D.F. representing the 8.9%, Zacatecas represent 4.4%, and Jalisco the 3.3%. Most men are from Jalisco with a 13.3%, and from D.F. and Zacatecas, which have the same percentage; they are representing the 7.8% each 4. Most of these immigrants have an outstanding education; entrepreneurs with a degree represent the 39.3%. This kind of entrepreneurs owns a high education level. On second place there are those who graduated from high school and represent the 20.3%, and on the third place there are the ones who graduated from secondary school and represent the 19.1%. Many entrepreneurs do not belong to an entrepreneurial association (60.7%), it is important to comment that the numbers mentioned before have increased within the last years. Entrepreneurs who do not have businesses in Mexico (86.6% asserted no to) mainly focus on American market. Most (69.7%) asserted that they did not have financial services in Mexico, but that was predictable since most of them neither have businesses in Mexico. More than a half of these entrepreneurs (50.6%) do own real estate in Mexico, which forms a very strong relationship with their origin country. When referring to those who have mortgages in Mexico, the 96.6% said not having them, which is not strange since entrepreneurs no longer live in Mexico. On the other side, most of these Mexican entrepreneurs (59.1%) do have mortgages in the United States. Mexican entrepreneurs, (95.6%) have insurance in the United States. On the results of the interviews it is shown that one of the most hired insurances is against theft or fire for their businesses. Most entrepreneurs, the 81.8% and the 81.6% have credit and debit cards respectively in the United States. Men use them more than women, although it is also important to mention that there are more men enterprises than women s. It is interesting to notice the way in which immigrant Mexican entrepreneurs do not have education loans in the United States. Loaning 3 Chart 12. SPSS data base

8 generally is not something that immigrants use, even if it is for education. In what refers to retirement funds, 50% of them asserted to have it and the other 50% did not. 69% do not have funds for investment. Investing in the stock market is something to which most entrepreneurs said no, that is an 87.4%. This data showed that financial system access is limited for immigrants and even though it has risen within the last years it has not been enough. The survey made through Survey shows which are the financial services that Mexican entrepreneurs have or have had in the United States. Firstly there are check accounts with 51 affirmative answers, secondly theft and fire insurance with 47 answers, and thirdly furniture insurance and medical insurance for their family with 45 answers. On the other side, those who answered, that is 19, mentioned that they would like to have financial or strategic advice, secondly 17 of them said that they would like to have investment accounts, and thirdly, 15 5 said that they would like to have medical insurance for them and their families. When referring to the kind if financing that Mexican entrepreneurs have or have had in the United States, debit cards are the number one answer with 46 affirmative answers, secondly there is suppliers credit with 40 affirmative answers, and thirdly, credit lines and loans from business partners with 24 affirmative answers. Respondents also mentioned that they would like to have credit lines with suppliers, 12 answers; secondly issue of securities, 11answers; and thirdly mortgage loan, debit cards, partner s loans and collateralized loans, 9 affirmative answers. Immigrants who answered Survey about the financing institutions they use or have used in the United States are firstly banks with 42 answers, secondly government institutions and loans from a family member with 18 answers, and credit unions with 10 affirmative answers. They said they would like to have mainly government institutions, 29 affirmative answers; secondly institutional lenders, 19 affirmative answers; and thirdly credit unions, 16 affirmative answers. 4. Conclusions Throughout current history of Mexican immigration to the United States, one may see a process of bi-national integration. This is characterized by an increase of bi-national families. Many members of a family have both nationalities: children were born in the United States or were born in both countries. And, little by little, using the same immigration laws in the neighbor country, there is the option of taking their parents to that country once they have acquired American citizenship. As time goes by, Mexican families are arriving and staying in American territory and the Mexicans growing stronger. Not only in those cities near the borderline, but throughout the whole nation up to Alaska. From the NAFTA on, immigration of Mexicans to the United States acquired a different view. Mobility has grown because of the economic policy that the Mexican government applied. Particularly, Mexican entrepreneurs of the first generation 5 Question 28. Survey data base.

9 who immigrate to the Unites States, are people who outstand because of their jobs and because they have very particular characteristics. When analyzing the impact of the recent economic crisis on the Mexican entrepreneurs established in Houston, Los Angeles and Chicago, one may find that there are very important aspects to highlight from what resulted of the interviews made there. A very important issue is the new wave of Mexican migrant entrepreneurs in the neighboring country, which has very different characteristics. The latter depends on the time that it takes for them to travel there and on the existence of noticeable differences in the cities where the study is being made. Since their establishment as entrepreneurs in that country, American financial system services have been used. Therefore to analyze the impact of the crisis on these entrepreneurs, as users of the financial system in that country, is very important to relate it to the rest of American population and the crisis impact. The study allowed observing that since the crisis, entrepreneurs utilities have diminished as well as the participation in their business. A possible answer is the reduction of REMESAS sent to their Mexican relatives. Interviews resulting percentages from the study made to entrepreneurs by city are as follow: Chicago, 47.3%; Houston 17.6% and Los Angeles 35.2%. Out of 47.3% that correspond to Chicago, 24.2% are men, 20.9% are women and 2.2% both. If Chicago is considered as the 100%, 51.2% are men, 44.2% women and 4.7% both. Houston represented the 17.6%; 12.1% are men and 5.5% are women. If Houston is considered as the 100%: 65.8% are men y 31.3% women. Entrepreneurs living in Los Angeles represented the 35.2%: 27.5% are men, 6.6% women y 1.1% both. If Los Angeles represents a 100%: 78.1% are men and 18.8% women and, 3.1% both. In what refers to integer numbers, the results are as follow: 43 interviewed in Chicago, 22 men, 19 women, and 2 both genders; in Houston there were 16 respondents, 11 men and 5 women; in Los Angeles there were 32 respondents, 25 men, 6 women, an 1 both. Crisis affected most Mexican migrant entrepreneurs. The obtained results out of the interview show that those entrepreneurs who answered YES, represent the 74.2% of the total and NO is represented by the 25.8%. Out of the percentage who said YES, 43.8% are men and 30.3% women. If YES represent a 100%, 59.1% are men and 40.9% women. Those who said NO represent the 25.8%, 19.1% are men, 3.4% are women and 3.4% both. If NO represent a 100%: 73.9% are men, 13.0% women, and 13.0% both. In what refers to integer numbers, the results are as follow: 66 entrepreneurs said having been affected by the crisis, out of those, 39 are men and 27 women. Those who said they have not been affected by the crisis are 23, out of which 17 are men, 3 women, and 3 both. Most Mexican entrepreneurs (74.2%) were affected by the mortgage crisis, but out of those affected, most are men (59.1%). Survey s results show that those entrepreneurs who have not declared bankruptcy at some point in the last five years represent 98.1% out of the total and those who have not lost any kind of property at some point within the last five years represent the 86.5% out of the total number of respondents.

10 References Carreras de Velasco, Mercedes (1974), Los mexicanos que devolvió la crisis , Secretaría de Relaciones Exteriores, México. Delgado Wise, Raúl y Beatrice Knerr (2005), Contribuciones al análisis de la migración internacional y el desarrollo regional en México, LIX Legislatura de la H. Cámara de Diputados, Universidad Autónoma de Zacatecas y Miguel Angel Porrúa, México, D. F. Durand, Jorge (2005), De traidores a Héroes. Políticas emigratorias en un contexto de asimetría de poder en Delgado Wise, Raúl y Beatrice Knerr, Universidad Autónoma de Zacatecas, Miguel Ángel Porrúa y LIX Legislatura, México, D. F. García Zamora, Rodolfo (2002), Los proyectos productivos con migrantes en Mëxico hoy, ponencia presentada en el Segundo Coloquio sobre Migración Internacional: México-California, Universidad de Berkeley, California, de marzo (folleto). García Zamora, Rodolfo (2004) Migración internacional y desarrollo local: una propuesta binacional para el desarrollo regional del sur de Zacatecas en Delgado Wise, Raúl y Margarita Favela, Nuevas tendencias y desafíos de la migración internacional México-Estados Unidos, LIX Legislatura de la H. Cámara de Diputados, Universidad de Zacatecas, Universidad Nacional Autónoma de México y Miguel Ángel Porrúa, librero-editor, México, D. F. Girón, Alicia y Alma Chapoy (2009), El Derrumbe del Sistema Financiero Internacional. Instituto de Investigaciones Económicas, Universidad Nacional Autónoma de México. Grabel, Ilene (2010), Remittances: Political Economy and Developmental Implications International Journal of Political Economy, M.E. Sharpe, Inc. vol. 38, no. 4, Winter , pp Massey, Douglas, Durand, Jorge and Malone, Nolan (2003), Beyond Smoke and Mirrors: Mexican Immigration in an Era of Economic Integration, Naciones Unidas (2012), Migración internacional y desarrollo, Informe del Secretario General Sexagésimo séptimo período de sesiones. Tema 22 del programa provisional de Globalización e interdependencia (búsqueda realizada el 3 de marzo de 2013). Vallejo, Jody (2012) Barrios to Burbs: The Making of the Mexican American Middle Class