Mexico’s 3×1 Programs Aims to Channel Remittances

The remittances sent home from Mexicans working in the US adds entries to both sides of the balance sheet.

First, the negative: the billions of dollars sent from immigrants living and working in the US to their family members around Mexico reflect a weak labor market and a scarcity of opportunities in Mexico. The fact that a waiter in San Diego could earn significantly more than an entry-level engineer at a maquiladora, and thus be in a better position to help support his family in, say, Durango, demonstrates that for generations, Mexican political and economic leaders have been unable to deliver prosperity to the masses in anything close to the degree that their northern counterparts have.

However, for the families that receive remittance payments, the extra cash is often an economic lifeline. According to the Inter-American Development Bank, almost one fifth of the Mexico’s adults receive remittances, and the overwhelming majority spend the money on goods forming the foundation of Maslow’s hierarchy: housing, food, and medicine. The typical payment is a couple hundred dollars, which may not sound like a huge amount, but can go a very long way in a country where the government’s official poverty line is just a bit over $150 per month for city dwellers, and closer to $100 a month for residents of the campo.

Nonetheless, despite the very real benefit, there is the worry that for such a huge revenue stream —measuring more than $20 billion in 2010— the nation’s citizens should see something a bit more substantial and enduring as a result of all that cash. Mexico’s 3×1 program addresses this by channeling remittances into projects that have a wider benefit.

The program is rather simple: for every dollar raised by a given immigrant association in the US for a specific project, each of the three levels of government (municipal, state, and federal) will match it dollar for dollar, using money received via tax receipts and oil revenue from Pemex, Mexico’s state oil company. If, say, the American organization representing immigrants from the Mexican state of Zacatecas raises $45,000 for a new church in the town of Fresnillo, the municipal, the state, and the federal governments in Mexico will all kick in $45,000 their own money, so that the project now has $180,000 supporting it.

The program was founded in 1993 as a 2×1 program limited to projects in Zacatecas. In 2001, with budgetary changes freeing up more money for municipal governments, it became 3×1, and has since funded scores of projects across Mexico. By 2010, close to 2,500 projects were being financed, with the federal government alone authorized to spend almost $50 million.

Despite its successes, a number of complaints about the practical impact of the plan have emerged. Some include the inevitable consequences of trying to pool the interests such a diverse range of people and governments stretched geographically and hierarchically–the immigrants in Chicago want a renovated public plaza, while the mayor’s office back home is more interested in a new water tower. Others point to the limited government budgets as a fundamental limitation on 3×1’s impact.

Still others point to some perverse side effects of the 3×1 program. While some of the more optimistic opinions of the 3×1 argue that it could increase political openness and the provision of public goods on the municipal level, a study from two Mexican researchers with CIDE, a university specializing in economic research, found that the opposite is true: public good provision actually declines in towns where the 3×1 program is in place, and political fiefdoms are typically strengthened. This not the final word on the program (other factors are likely at play as well), but it does offer some indication about the practical limitations of funneling immigrant payments toward a greater goal.

Regardless of its efficacy, both the benefits and drawbacks of Mexican immigration and the 3×1 program will be shrinking in the coming generations. The fundamental reason is that lower birth rates will lead to a labor force more in line with what the job market has to offer, which will reduce one of the primary drivers of immigration. For the optimistic, another factor is that rising Mexican prosperity will shrink the difference between what one can expect to earn on the northern side of the Rio Grande.

Readers of the New York Times saw an example of what the future holds in Damien Cave’s lengthy July 6 report on the decline of immigration flows from Mexico. In short, thanks to a combination of factors, Mexican illegal immigration flows have dropped to less than 100,000 per year, an 80 percent decline from the figures from 2000 to 2004.

What that also means is that the importance of immigration as an economic escape valve for poor communities will be reduced as well. Remittances will almost certainly slow as a result, which means that the funding available for 3×1 may decline as well. If the program works as intended, however, it will leave some tangible signs of its previous success, even as it fades.