The Mexican Diaspora Investment Partnership
Can public-private-diaspora investment partnerships foster economic development in the communities where they are implemented? This was the subject of a discussion hosted by the Inter-American Dialogue on the outcomes of the 4+1 program—an innovative initiative, involving US migrant associations, the three levels of Mexican government, and private partner Western Union in an effort to finance small businesses in Mexican communities. The event took place at the Dialogue on October 14.
The 4+1 program is an ongoing initiative that began in 2005. The recent study co-authored by Manuel Orozco, Dialogue senior associate and director of the remittances and development program, and Katherine Scaife, former Dialogue program associate, evaluated 24 projects that supported 215 jobs in the states of Michoacán, Zacatecas, Veracruz, Guerrero and Guanajuato.
One of the projects in Guanajuato made the business of cultivating grazing land for livestock more appealing to young people, preventing them from migrating and allowing them to buy tractors to reduce physical labor. Scaife emphasized that without the financing received through the program such projects would not have been possible. Yet even with the help of the program, participants often still face the challenges of a saturated market and strong competition from larger companies, making transnational markets attractive but inaccessible without technical assistance.
“The contribution of the program is quite modest, but it can be replicated and improved,” remarked Orozco. The majority of the projects had an impact on the communities where they were implemented, creating jobs –between 5 and 10 per project- and relying on local markets for raw materials, thereby improving the local economy.
The 4+1 program also helped create social capital by promoting community participation. Lázaro Cárdenas Batel, former governor of Michoacán state commented that the program resulted in stronger cooperation between migrant communities both in Mexico and the United States, fostering the creation of “clubes espejo” to the Hometown Associations.
The study outlined the importance of the program as a response to the lack of public and private financing in Mexico. While most small business owners are interested in and in need of financing, they often do not know how to access financial services, and frequently their needs are poorly addressed by commercial institutions.
Cárdenas Batel pointed out the importance of initiatives like the 4+1 program, but cautioned that they should not displace the role of the state in promoting small businesses: “The authorities should not give up or transfer their responsibilities with regard to development initiatives.”