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Remittances In Peril

Trump has apparently given plenty of thought as to how to come up with the funding
By The News · 09 of March 2017 09:34:35
An employee counts U.S. dollar notes, An employee counts U.S. dollar notes in a bank in Cairo, Egypt March 10, 2016. REUTERS/Amr Abdallah Dalsh, photo: Reuters/Amr Abdallah Dalsh

No question about it, the Mexican government is running scared with the very real threats President Donald Trump made against Mexico and Mexicans, which would eventually hamper the Mexican economy.

As time goes by the issue of dissolving the North American Free Trade Agreement (NAFTA) is waning away as the treasury secretaries of the two nations, Steven Mnuchin and José Antonio Meade Kuribreña met Tuesday and touched on NAFTA renegotiations which were first programmed for the summer and now postponed, according to Commerce Secretary Wilbur Ross.

But one issue of great concern is that starting this week, the White House will start receiving budget proposals for the construction of a border wall promised by President Donald Trump to his voters, as he’s made a point to continue erecting “a beautiful” wall along the Rio Grande side of the border.

Even after receiving proposals, the Trump Administration will face two problem: first, the cost of the proposals, which will start pouring in as of Friday, and second, figuring out how to pay for the construction now that President Enrique Peña Nieto has made a vehement denial of any payment, which he considers an ominous insult to Mexico. Hearsay has it that the wall, if cheap, may cost anywhere from $15 to $50 billion.

Surely President Trump will soon make public what’s he’s got in terms of planning — the guy seems to enjoy talking about this issue — and how to proceed.

But the budget is one thing, and coming up with the funds for it — which clearly even his own Republican Congress has said they will not back given not just the cost, but the worldwide implication it will have of the United States as a closed up economy — is another.

Trump has apparently given plenty of thought as to how to come up with the funding always claiming that “Mexicans will pay for it” and the first one he mentioned was taxing remittances from Mexicans working and living in the United States.

The threat of a new tax on remittances — states like Oklahoma already slap a one percent surcharge — does not seem to scare workers sending money home. Even in the U.S. Congress a two percent federal tax is being considered.

What’s scary is getting deported and this is a very real threat, as Homeland Security Secretary John Kelly announced Monday that his security office is willing to break up families who have U.S. born children and undocumented parents by deporting the adults.

The result of all the threats — very real now that Trump’s in power — is that the amount of remittances has skyrocketed since last November and during 2016,  Mexico’s Central Bank (Banxico) reported a record amount in history for national dollar income putting the total amount at $26,970 million with $25,742 coming from the good old USA.

The Trump scare has not only hit Mexico, but Central America as well and according to the Inter-American Dialogue Organization in the “Northern Triangle,” nations of Central America (El Salvador, Guatemala and Honduras) remittances grew by 8 percent in 2016. In terms of last year’s remittances, El Salvador received $4.6, Guatemala $7.2 and Honduras $3.9 billion, in round figures. The total amount of remittances to all the nations of Latin America is put at $70 billion.

“For decades remittances have become a crucial complementary income for women, children and the elderly whose very survival depends on them,” says the report published in Spanish this week.

The problem Trump also faces — says Inter-American Dialogue — is that if deportations continue unabated there will be a day when remittances are not there, not merely creating further economic problems for the nations receiving them, but he will not have them to tax, which is a minus for his wall plan.

“Remittances have become an important tool for resilience, survival and protection in the region” and nowadays an integral part of the economies, including that of the United States.

Remittances are cash that flows directly to the economies so it’s no wonder the Mexican as well as the Northern Triangle governments are running scared as an income that brings great relief to the families of these nations is at peril.