Pozzorubio - Wall Street Journal

Checks in the Mail – For a Philippine Town, Monthly Allowances Pave a Road to Riches – Third World Gets Huge Sums From Relatives Abroad; Same Call it Dependence – Pozorrubio’s Lights Go On

Wall Street Journal, Tuesday, May 22, 2001. By Robert Frank

Pozorrubio, Philippines – For hundreds of years, this remote farming town made a living by growing sugar cane, rice and coconuts in the Philippines floodplains. Today, it’s found a more modern calling – harvesting money from its thousands of citizens working overseas.

“Now we grow big houses,” smiles Noli Venezuela, the town’s former mayor, walking past a Spanish-style mansion in the middle of rice paddies. “This one’s owned by a maid in Hong Kong. Across the street, she’s a nanny in Canada.”

Remittance income, or the money sent home by workers living abroad, is rapidly transforming this town of 60,000, where one in 10 people works overseas and many families collect their monthly income from the Western Union window. Even as economists and academics wage a growing debate over how remittances affect the developing world, the benefits are increasingly clear in towns like Pozorrubio.

There’s a new park in the town square, with fruit trees and Chinese pagodas, compliments of a group of maids, nannies and nurses working in Hong Kong. Workers in Guam funded a new library, and proud Pozorrubians working in the U.S. paid for bus stops, small roads and a sign for the school. A group called the Pozorrubians of Greater Los Angeles recently flew in to bring the hospital a batch of antibiotics and stethoscopes.

Renting “Terminator 2”

The town’s main street is overrun with new shops and businesses, thanks to money earned overseas. Lorna Terre worked for five years on an assembly line in Japan, snapping together television plugs, before using her savings to open L.J. Video Rental, which now does a brisk business in titles such as “Terminator 2” and “Coming to America.” Down the road, Salcedo’s Hardware is selling so much concrete and building supplies for new homes that it had to open a bigger store. Every Sunday morning, families crowd into the Ritz.com Internet Café to e-mail their mothers and sons abroad.

“Our problem is we have money than we really need,” says Fatima Costa, manager of the town bank, the Rural Bank of Pozorrubio, which has more than 2 million in deposits. “We need more borrowers.”

The global growth in remittances is spreading newfound wealth t the far corners of the developing world. Remittances have soared to more than $70 billion a year worldwide, according to the International Monetary Fund. That’s greater than total government aid to developing countries and larger than all the foreign direct investment by U.S. companies in emerging markets last year.

From Indian software engineers in California to Turkish construction hands in Germany to Vietnamese maids in Taiwan, workers who send part of their first-world salaries to their third-world homes have become an increasingly powerful force in the world economy. More than $13 billion a year is sent out of the U.S. alone, making America the world’s largest source of remittances. Global migration and the wide gulf between the world’s rich and poor economies help fuel the remittance business.

Competition for Western Union

Business and governments are taking notice. Large banks in Mexico, El Salvador and Turkey are selling “remittance bonds,” or loans backed by the cash that overseas workers deposit in the banks for their relatives. Dozens of electronic money-transfer firms and couriers are opening in the U.S. to take on Western Union and MoneyGram, driving down the industry’s historically high fees. The U.S. Postal Service recently launched Dinero Seguro, or secure cash, which allows people to wire money from parts of the U.S. to Mexico. Vietnam, Pakistan and other countries are rewriting their banking regulations and tax laws to attract even larger flows.

Yet the growth has also sparked a new ideological battle over how remittances are being spent overseas. At issue: Are remittances being invested to create new economies or simply being waster on big-screen TV’s and faux-adobe mansions? A study of 22 migrant communities in Western Mexico in the early 1990s, led by Douglas Massey of the University of Pennsylvania, found that families typically spend more than half their remittances on daily living expenses, consumer goods and health care, yet less than 10% is used for savings or starting new businesses.

Some argue that remittances can limit a country’s growth, since governments learn to rely on the easy incomes as a way to avoid deeper reforms. Albania was so flush with cash from Italy and Greece in the mid-1990s that the capital of Tirana became overrun with “remittance cafes,’ where the unemployed gathered to spend their days sipping away rich allowances.

“You have a cycle where people are forever forced to leave the country for high-paying jobs,” says Steve Graw, a sociologist at Cornell University who has studied remittances in Asia. “That’s not real development.”

Increasingly, however, economists’ believe remittances can deliver far-reaching benefits to a country and community, even if there are social costs. By pooling their money, overseas workers are funding larger civic projects and businesses. “We want o leave behind more than washing machines and big TV’s,” says May-an Villalba, a former nanny in Hong Kong and director of Unlad Kabayan, a Philippine group that has pooled remittance savings to start everything from chicken farms to yam processing plants.

Even boosters agree that remittances carry a price, as families send their best and brightest overseas. Yet a close look at Pozorrubio, a tiny tropical outpost on the global remittance trail with one of the highest concentrations of overseas workers in the world, shows how remittances can help raise a community from poverty--often more effectively than governments.

Under the shade of a banyan tree on his patio, Mr. Venezuela, the former mayor, dug into his lunch of chillied beef and rice. A portly man with a ready smile and fondness for karaoke, Mr. Venezuela is known to locals as the “spirit of Pozorrubio.” He took to the streets against Ferdinand Marcos in 1986 and served as mayor for 10 years, continuing the legacy of his great-great-grandfather, Don Benito Magno, who was the town’s first mayor. “We may be a small town,” he said, “but we’ve always been progressive.”

The Refrigerator on the Porch

It was Mr. Venezuela who decided the town should start using remittance money on substance rather than just style. In the early 1980s, the Philippines’ plunging economy sent Pozorrubians, along with millions of other Filipinos, abroad to seek work. Concrete homes soon replaced bamboo huts, while motorcycles replaced oxen and bicycles on the streets. Pozorrubio’s meat market doubled from 20 pigs a day to 40. Families – many who didn’t even have electricity – nonetheless bought dishwashers, refrigerators and televisions, putting them on the porch for display.

Yet, walking through the neighborhoods, Mr. Venezuela noticed that little of the wealth was flowing back to the community. “People were spending just to spend,” Mr. Venezuela said.

So, in 1988, he flew to America – home to a growing number of Pozorrubians – and began a cross-country crusade to reinvent remittance spending. He discovered a park in San Francisco where Filipinos gathered on their days off and, convening a group of 30 Pozorrubians at a picnic table, asked them to join together to fund larger projects that would help their hometown. “I think we started with street lights,” he says. He then took his message to Los Angeles, San Diego, Chicago and New York.

Within weeks, the Pozorrubians started calling other Pozorrubians in the U.S. and banded together to raise money. Today, there are at least five Pozorrubian clubs in the U.S. funding everything from school books to bus stops to medical supplies.

Manny Saplan, a postal clerk in Long Beach who is head of the Los Angeles Pozorrubian Association, helps raise thousands of dollars a year to send back to the town. “We understand their problems with poverty, so we want to help,” he says, adding that the gifts also “make us feel important.”

From Bedsheets to Window Screens

At the 10-bed Pozorrubio Community Hospital, chief doctor Francisco Llamas offers a tour of the freebies: the bedsheets from Chicago, the electrocardiogram from California, the window screens from Los Angeles and the hospital’s only computer from a Pozorrubian working in New Jersey. “Even this stethoscope,” he says, checking the heartbeat of a young girl in the patient ward, “it came from the folks in L.A.”

Overseas workers have also given a shot in the arm to the town’s private sector. Pozorrubio’s main street is jammed with shops, vegetable stands and motorcyle-taxis. Sitting on the front porch of her home at sunset, Violeta Salazar reflects on her budding business empire, launched with the savings from 17 years of domestic work in Hong Kong. Now back in Pozorrubio, she owns a dress shop, an arts-supply store and tailoring business. She even has motorcycle-taxi which she rents to other family members.

“If I stayed in Pozorrubio, I would never find the money to open my own businesses,” she says.

The streets of Pozorrubio also advertise a more lasting benefit of remittances – education. Contrary to the argument that remittances are wasted on luxury items, a recent study by Mr. Graw in the Philippines showed that education is a top priority for remittance families, second only to daily household expenses, and ranked well above appliances and even housing. Ms. Salazar, with her salary as a maid, sent all five of her children to college –one son is an architect, another a veterinary doctor.

Pozorrubians are so proud of their educational wealth that they post their degrees on giant black and white signs above their front doors. House after house reads, “Certified Public Accountant,” “Attorney at Law” or “Registered Nurse.”

“Education is the reason we make this sacrifice,” say Ms. Salazar. “It hurt me to leave my children, but I did it to give themselves a better future.”

Yet for the children in Pozorrubio, that better future still lies far from home. With unemployment in the Philippines at 15% and wages below $5 a day, the country’s most promising young people still seek their fortunes overseas, even if it means putting their engineering degrees to work behind a vacuum cleaner or bedpan. Many economists argue that remittance money can help break the cycle of overseas work by improving the economy back home. Yet in Pozorrubio, the children of overseas workers usually become overseas workers themselves.

At the Pozorrubio Elementary School, Raymunda Amasec’s sixth grade class settles in for its reading lesson. In their crisp white uniforms, the 12-year-olds speak perfect English and are the top performers in the school. About half have mothers and fathers working overseas, and nearly all want the same prize when they grow up – an overseas job.

“I want to work in the U.S.,” says sixth-grader Marysol Marzan, “as a domestic helper.”

There are other dark sides to Pozorrubio’s remittance economy. As night falls, Evelyn Guillermo lights a gas lamp in her bamboo hut and stirs a pot of rice over the fire. Her two infant daughters and her husband wait for dinner, their usual fare of rice and mashed tomatoes. Ms. Guillermo earns about $1.50 a day picking peanuts, while her husband earns about $2 a day making concrete blocks – worlds away from the $50 to $100 a week sent to remittance families. With all Pozorrubio’s new wealth, it has yet to trickle down to people like Ms. Guillermo, reflecting what many fear is a growing income divide caused by remittances.

“These are the lucky ones,” Ms. Guillermo says, glaring at a new villa across the road built by a maid in Hong Kong. “Their life is so easy.”

Sometimes too easy. Just down the road, Allan Siblag, whose wife works as a maid in Hong Kong, sits at a mahjong table in his yard with four relatives. Surveying the plastic blocks before him, he throws another 20 pesos into the wager pot. When asked what he does for a living, his mother-in-law quips: “He plays mahjong.”

But for now, he spends most days playing with his baby son, riding his mountain bike through town, and spending occasional weekends at a nearby resort town drinking beer with his buddies.

“Sometimes I miss work,” he says. “Especially when I’m losing money at mahjong.”