November 14, 06

NEWS / Immigrants send billions abroad each year. Now, banks want a piece of the action.

About 10 people each week stop by Gustavo Garza??™s Mac Newsstand in McAllen to wire between $100 and $150 home to their relatives south of the Rio Grande.

"That??™s a lot of money in Mexico," the 60-year-old shop owner said.

It??™s a scene repeated at grocery stores, gas stations, check-cashing establishments and money exchange businesses throughout the Rio Grande Valley as residents with relatives in Mexico seek to help their families back home pay bills, buy food and establish savings.

Immigrants sending remittances traditionally have shunned established financial institutions, preferring money transfers offered by companies like Western Union and its subsidiary Orlandi Valuta or MoneyGram, which charge fees for their services.

But banks worldwide and in the Valley, which can offer lower charges for each transmission, are seeking a greater share of the billions of dollars in remittances flowing between migrants and their families.

The Valley also plays a more subtle role in the remittance market, serving as one of the gateways along the U.S.-Mexico border through which immigrants flow to the interior of the United States. Higher-paying work and the thought of sending some of that money home drive many immigrants from Mexico to the United States.

Almost 200 million migrants worldwide sent home more than $167 billion to developing countries last year ??” more than twice the level of international aid ??” according to the World Bank.

Latin American migrants working in the United States will send home about $45 billion this year, up from some $30 billion in 2004, according to the Washington, D.C.-based economic and social development lender Inter-American Development Bank. Texas ranks second in the nation, behind California, for remittances to Latin American and Caribbean countries.

Last year, Mexico alone received more than $20 billion, mostly from immigrants living in the United States.

Some traditional Mexican destinations for remittances are the states of Oaxaca, Michoac?n and Zacatecas ??” also traditional origins for Mexicans leaving for the United States, said Pedro De Vasconcelos, coordinator of the bank??™s remittances program.

The transfers help alleviate poverty and contribute to higher savings and better access to health and education. They also promote entrepreneurship and reduce economic volatility and inequality, according to the World Bank. But home countries can suffer because of a decreased labor force as migrants leave, and remittances can contribute to lowered competitiveness when those countries trade with their neighbors.

The Valley??™s Outflow

Disagreement exists over how big the Valley remittance market is.

"Here on the border, there are not a lot of remittances" to Mexico, said Horacio Thomas, senior international officer with Edinburg??™s First National Bank.

Remittances make up about 1 percent or less of the bank??™s international transactions, he said. First National??™s main international customers are maquiladoras and corporations in places like Reynosa, Matamoros, Rio Bravo and Monterrey.

Meanwhile, McAllen-based Inter National Bank is poised to capture more of the remittance market than it has in the past as Monterrey-based Grupo Financiero Banorte SA is in the process of buying a 70 percent stake in the local company. The deal is expected to close this week and will allow the banks access to business on both sides of the Rio Grande.

"We??™ve been involved with a small number of remittances, but not much," said Carlos I. Garza, Inter National??™s president and chief executive officer. That??™s because being successful in the remittance business takes a certain amount of infrastructure, such as sending and receiving points, that Inter National didn??™t have before the merger.

The process generally requires an agent like Western Union, a check-cashing service or a bank in the United States, as well as an agent in Mexico so the recipient can receive delivery of the money.

"Now it becomes feasible and effective and efficient to do," Garza said.

Banorte is furthering its reach into the vast amount of money being sent by migrants around the world. To do so, it is in the process of acquiring Rochelle Park, N.J.-based remittance company UniTeller Holdings Inc. in a deal expected to close early next year.

"There??™s a significant market in transmittals," Banorte spokesman Mark J. Robertson said of local remittances.

Spain??™s second-biggest bank, Banco Bilbao Vizcaya Argentaria SA, as part of a strategy for a larger presence among U.S. Hispanics, bought McAllen-based Texas State Bank. The deal closed Friday.

Officials at BBVA??™s Bancomer Transfer Services say people living in border towns typically do not send remittances home electronically, according to an e-mail from spokeswoman Julissa Bonfante. Rather, they cross the border and give cash directly to their relatives or have friends deliver the money.

While the Valley is a gateway into the United States, migrants tend to keep moving north into big cities, where work is more plentiful, said Celia Figueroa, a vice president with Bancomer Transfer Services.

"That??™s why you have a limited market there," she said, speaking of the Valley remittance market.

Growing Demand

Banks have not historically been the mechanism of choice for sending remittances. According to the Inter-American Development Bank, the number of remittance senders who use banks or credit unions has increased from 8 percent to 19 percent. But most immigrants in the United States still feel disenfranchised from the banking system because of legal and regulatory hurdles, cultural factors and a lack of appropriate financial products.

Instead, migrants send funds home with money orders, personal checks and electronic transfers. In addition to directly sending cash home, remitters also make "in-kind" transfers, where receivers can pick up building materials, for example, instead of cash.

The Federal Reserve, in conjunction with the Mexican central bank, has been promoting its international electronic funds transfer service for banks and credit unions for two years, making a stop in McAllen recently. The Fed aims to help U.S. financial institutions increase their share of the rapidly growing United States-to-Mexico remittance market.

Financial institutions have told the central bank they??™ve been seeing more requests for remittance services from their customers than they used to, said Elizabeth McQuerry, a vice president with the Federal Reserve Bank of Atlanta who oversees the funds transfer service.

People in the Valley traditionally have crossed the border and sent domestic transfers within Mexico, McQuerry said. Crossing the border has become more of a physical hassle, resulting in more requests for U.S. banks and credit unions to transfer funds from the U.S. side of the border.

Valley residents who are not U.S. citizens and may or may not be in the area legally stand in line each day at the Mexican consulate in McAllen to get matriculas consulars, as the Mexican government-issued identification documents are known. Some apply for the document so they can send money home through a U.S. bank that accepts the documents as proper identification, said consulate spokeswoman Miriam Medel.

"Banks have not necessarily been the form of choice for non-U.S. citizens to send money to Mexico," said A. Jabier Rodriguez, chief executive of Pharr-based Lone Star National Bank.

Matriculas consulars are acceptable identification documents at the bank, enabling non-U.S. citizens who can produce at least one other form of ID to open a checking account or send remittances.

About 35 percent of the bank??™s deposits come from people living in Mexico, Rodriguez said.

"We??™ve always sold pesos and sent money into Mexico," he said, but remittances in the past haven??™t been a big portion of the bank??™s business.

Rodriguez said he expects that percentage to increase now that the bank is involved with the Federal Reserve??™s money transmittal program.

"We have a pretty substantial market here," Rodriguez said of remittances in the Valley. "We believe it??™s going to be an increasing business."

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Matt Whittaker covers business, economics, finance and social issues for Valley Freedom Newspapers. He is based in McAllen and can be reached at (956) 683-4422. For this and more local stories, visit www.themonitor.com.

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