By Harriet Murray ● Cochran Real Estate ● February, 2012
When immigrants send money back to their home country, these funds are called remittances. They are private funds which usually go to the immigrant’s family directly through wire transfers. This cash flow becomes its own economy: cash transfer companies stay in business, recipients purchase necessities, such as food, clothing, and shelter. Sometimes their use of funds includes down payments on housing. Home mortgages are offered by the Mexican government in the Infonavit program.
Home ownership creates other benefits. Some locations or cities acquire more and better workers than they would otherwise. Laborers or blue collars seek areas to live and work where the chances of work are highest. They depend on their migrating family members sending home funds to help them live in inflationary cycles and when jobs are less available.
Here in Puerto Vallarta and the Bay of Banderas, we see new communities of Infonavit housing up and down the highway between Vallarta and Nuevo Vallarta. The labor force is concentrated to find work up to Punta Mita and down to Mismaloya.
Another source of financial help for the average Mexican worker to buy a home is the financial help given to them for down payments and closing costs from their employers. I know of several foreign residents who have helped their house staff or service providers buy their own homes.
A criticism of developing countries use of remittances is the danger of using the funds for cost of living expenses rather than developing small businesses, which add to the economy and give the owner more financial independence. Without entrepreneurial projects from these funds, there can be hard times for the recipients when the global economy is unstable and remittances are down.
Remittances from the USA to Mexico were up by 21% in September, 2011 to $2.08billion usd. This is the highest gain since October, 2006. Dollars buy more pesos now, and migrants know to how to use an arbitrage opportunity. Because we are talking billions of usd dollars, remittance activity could serve to limit the effect of depreciation of the peso.
Remittances are an important factor in the global economy. It helps drive growth both at home and abroad.
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review.