Migration and local development Remittances and business creation in migrant communities in Western Mexico Dr. Alejandro I Canales Dr. Cristóbal Mendoza Universidad de Guadalajara Colegio de la Frontera Norte acanales@megared.net.mx cmendoza@colef.mx

Objectives Assess the role of remittances in household income in Jalisco (Western Mexico). Evaluate the relevance of remittances for business creation. Examine reasons for business creation and types of business of return migrants in order to assess their potential for regional development.

Data 2000 Mexican Census. 10% survey. Representative survey for all Mexico’s municipalities and localities of 50,000 and more inhabitants. 2000 Survey of Migration and Remittances. Representative household survey for Teocaltiche, Altos de Jalisco. 370 household (half of them receiving remittances) contacted and 1,200 people interviewed. 2000 Survey on Business Creation of Return Migrants. Non-representative survey of 60 businesses created by return migrants in Teocaltiche, 48 formal and 12 informal businesses.

Income distribution in Teocaltiche’s households receiving remittances 2000 (%) Remittances account for 40 % of all income received by households. Remittances represent almost the same percentage as wages (44%) for household incomes. Other forms of income (except businesses) are negligible.

Origin of remittances in Teocaltiche’s households 2000 (%) More than 60% of all remittances come from wages of US immigrants. A quarter of remittances are in fact pensions of retired migrants. Business transactions only account for a marginal percentage of the amount of all remittances.

Use of remittances in Teocaltiche’s households 2000 (%) Households consume 60% of all remittances. The percentage of remittances used for financial purposes is as low as 5%. Around 10% of remittances is saved at homes (delayed consumption).

Return migrant business in Teocaltiche: Reasons for starting a business 2000 (%) The main reason for setting up a business is to stay in Mexico. Businesses and self-employment are equally seen as better economic prospects (27%) and as a source of income (probably precarious self-employment or businesses, 24%).

Return migrant business in Teocaltiche: Average initial investment by economic sector 2000 Average initial investment for business creation is as low as 6,000 US dollars. By sector, manufacturing requires the lowest investment and the primary sector the highest one.

Conclusions Households use temporary migration as means of diversifying income: Almost 20% of all occupational units have at least one temporary migrant to the USA in Los Altos (8% for Jalisco) during the period 1995-2000. Remittances still play a crucial role for household income in Los Altos de Jalisco: 13% of all income in the region comes from remittances (18% for Teocaltiche). Only a marginal part of remittances is used for business purposes in Teocaltiche.

Conclusions The main reason for starting business is not financial. Tha main purpose of business creation is to avoid returning to the USA. Rather than leading to upward mobility, businesses based on remittances tend to be precarious in nature.