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For immediate release: August 20, 2007

Remittances, Free Trade and Cross-Border Banking Examined in Dallas Fed Report

DALLAS—Remittances to Mexico, free trade and cross-border banking are the focus of the Federal Reserve Bank of Dallas' latest issue of Southwest Economy.

Lower money-transfer costs and better measurement techniques likely explain the post-2000 growth in remittances from the United States to Mexico, according to Dallas Fed assistant economists Jesus Cañas and Roberto Coronado and senior economist and policy adviser Pia Orrenius.

In "Explaining the Increase in Remittances to Mexico," the authors assert that the growth in the Mexican migrant population and their income alone can't account for the increase in remittances.

"Real remittances grew 170 percent from 2000 to 2005, but in the U.S., the Mexican-born population grew only 20 percent," they write. Instead, they find that more migrants are turning to formal channels to send remittances due to reduced fees and that the Banco de México has modernized procedures for collecting and recording remittance data.

"Spurred by declining costs for both senders and receivers, migrants increasingly have been transmitting remittances through formal channels rather than informal channels, such as carrying cash back home," according to the authors.

Many Americans get only the protectionist viewpoint on free trade, says Blake Hastings in this issue's "On the Record" conversation.

"They rarely hear how protectionism distorts the economy, leads to higher prices, breeds mediocrity in service and product quality, and reduces variety," says Hastings, vice president in charge of the Dallas Fed's San Antonio Branch and former executive director of the Free Trade Alliance in San Antonio.

Hastings points out that South Texas cities, including San Antonio and McAllen, are reaching out to China, Brazil, Canada and Europe for trade opportunities.  "All these communities are learning that you can't just wait for trade to come to you," he says.

In "Banking Industry Evolution Along the Texas–Mexico Border," economic analyst Joaquin Lopez and senior economist and policy adviser Keith Phillips review presentations from a recent Dallas Fed conference, "Cross-Border Banking." They report that as opportunities for banking increase along the border, the divide between U.S. and Mexican financial systems will continue to fade.

Speakers at the conference included Dallas Fed international financial analyst Edward Skelton, who said that explosive growth in the securitization and mortgage market in Mexico will boost the nation's economy by encouraging higher-quality housing, increased savings and greater wealth creation.


Media contact:
James Hoard
Phone: (214) 922-5307