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Raising Wages in Mexico Could Sharply Reduce Illegal Immigration, Experts Say

by Luis Vieira, published
One of the benefits sold by former U.S. President Bill Clinton to approve the North American Free Trade Agreement (NAFTA) in 1993 was that the agreement would reduce illegal immigration substantially. Twenty years after it was enacted, experts mostly do not agree on the particular effect NAFTA has on immigration.

Using the numbers to analyze it, the results are confusing. For years after the bill, the number of undocumented Mexicans in the United States skyrocketed from 2.5 million in 1995 to 11 million in 2005. However, the trend turned upside down when the United States economy slowed down in 2007 and plunged into the "Great Recession." After that time, the number of undocumented Mexicans in the U.S. shrank more than one million until 2013, according to a survey from the Pew Research Center.

Some might say that "it's the economy, stupid!" But, NAFTA generated a lot of investments in Mexico from U.S.-based manufacturers. At the time, however, China was a tough competitor to the factories in Mexico and the U.S. attracted the Mexican labor with a growing economy and higher demand for manual labor. Some economists say that with more integrated economies, simply having better wages in Mexico could have stopped or would break illegal immigration.

That's the opinion of Dani Rodrik, an economist and trade specialist at John F. Kennedy School of Government.

"The main thing that would have stemmed the flow of people across the border was a rapid increase in wages in Mexico. And that certainly has not happened," he told the New York Times.

Adding to the problem, the Mexican Peso devalued in the early 2000s -- something that made wages in dollars even more attractive to Mexican workers.

Former professor at the University of Texas and diplomat, Sidney Weintraub, believes that rural Mexico had an important role on the migration issue. While zero external tariffs have made Mexican farmers much less competitive against their US counterparts, cutting thousands of jobs in rural Mexico, food prices have dropped significantly in Mexico. Some rural workers migrated north, while other Mexicans left poverty.

For the next few years, on the other hand, this is likely to be reversed. At the World Economic Forum in Davos, Mexico was highlighted as one of the best options for investments because other emerging markets like Brazil, Russia, or India have weakened and Mexico has an expected growth of 4 percent in 2014.

Also, some factories that went to China previously might return either to Mexico or the United States because of transportation costs from China to North America and increased wages in the Asian country, according to a report from Barclays. For Carlos Capistran, an economist at Bank of America Merrill Lynch, Mexico has stolen a share of China's trade with the United States and might continue to do so.

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