December 2nd, 2008
08:29 AM ET

Latino Immigrants and the Current Economic Crisis

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Editor’s Note: Juan Tornoe is a marketing consultant and trend watcher. See his blog at juantornoe.blogs.com.

Juan Tornoe | BIO
Hispanic Trending

Recently I've been pondering about how will Hispanics, specifically Hispanic immigrants, be affected with the current crisis, how will their buying habits shift, and most importantly to you, how will this affect all those marketing to Latinos.

A few weeks back I received a message asking how to "build the case for continued Hispanic market outreach in these times of economic crisis." Then I participated on an online forum where we discussed, among other things, "the financial value of the Hispanic Segment". Right after that I received another invitation to participate in a panel where we will discuss "Investing in the Hispanic Market." You can tell that this is a hot topic for everyone (you, me, and the guy in the cube or office next to you), so I decided to share with you my thoughts on this "Hot Issue".

As you've heard me say before, the Latino community is way too diverse to gather them into one single group and come up with a rational, practical and true conclusion. It is a completely different reality for a 3rd Generation Latino Baby Boomer living in Santa Fe, NM than for an immigrant in its early 30s who's starting a family in Houston, TX. The former's experience is way more similar to that of the "average American" that the latter's will ever be.

I have purposely focused this analysis on Latino Immigrants.

First, let's get one thing out on the open, documented or not Hispanic immigrants came to America in search of a better future for them and their families that for whatever reasons their native country could not offer. For the most part, they bet all their chips on the United States believing it is The Land of Opportunity. So, the U.S. is going through a rough patch right now… Seriously, this is NOT a big deal if you have lived in Latin America for a good part of your life. Most Latinos will have a "been there, done that" attitude towards it, tighten up their belts, and face the crisis diving head first into it in comparison to the average American who's been living in abundance (relatively, at least) for their entire life and now are facing vast uncertainty.

Let's take a look at some of the stumbling blocks brought by the current economic crisis:

The Crumbling Stock Market: To which many of my fellow Latino immigrants are immune to and ask, like I did the first time I heard the term, "401 ¿Qué?" Seriously, Hispanic immigrants were not heavily invested (if invested at all) in financial instruments that have nosedived in recent months: 401Ks, IRAs, Mutual Funds, Stocks, Bonds, CDs. They have not seen a sudden and dramatic loss in equity as the average American is experiencing.

Looming Credit Card Debt: It has been widely reported in the news that Latinos are not big credit card users. According to recent data from Experian Consumer Research 58% of the Hispanic population have not used a credit card in the past 30 days, 42% of Latinos don't like the idea of being in debt, and 31% often pay cash for the things they buy, (and these numbers take into consideration ALL Latinos, not only immigrants). You can be sure that credit card debt is not at the top of the list of problems stressing out Hispanic immigrants.

Problem Banks Rising to a 13-Year High: For as long as I've followed trends in the Hispanic market banks have been striving to gain more Latino Customers. A recent report from Synovate indicates that nearly 23% of all Latino families lack any type of bank account, while the National Council of La Raza says that up to half do not have a checking or savings account. Again, these numbers represent the entire Hispanic population; for Latino immigrants the percentages, I assure you, are higher. So as many Americans are losing their sleep over the banking crisis, many Latino immigrants are comfortably resting on their very own "Mattress" bank. For Hispanic immigrants it is mostly a cash economy, banks and credit cards companies are not part of their everyday life.

Rising Unemployment Rates: According to a June 2008 Pew Hispanic Center report, "the unemployment rate for Hispanics in the U.S. rose to 6.5% in the first quarter of 2008, well above the 4.7% rate for all non-Hispanics mainly due to a slump in the construction industry." Absolutely true, but contrary to your average gringo (and I say this in the nicest possible way), losing your job is not uncommon or a big deal in the reality Latino Immigrants lived before coming to America. If they lose their job, they look for another one, even if at a lower wage, in a different industry or in the underground economy. According to a late 2007 study commissioned by the Federation of Latin American Banks, "… although 70 percent of migrant workers reported increased difficulty finding employment in today's economy, only 10 percent reported unemployment, and 68 percent found jobs within three months." The fact that the Pew Hispanic Center reports that the leading sources of jobs growth for Hispanics were business services and hospital and other health services supports these statements and shows the resilience of the Latino workforce.

The Mortgage Crisis: According to the latest figures from the Bureau of Labor Statistics' Consumer Expenditure Survey (2006), half of Latinos rent vs. owning their homes, compared to 30% of non-Hispanics. While more than half of General Market consumers hold a mortgage, only 26% of Latinos do (Synovate, 2008). Although it most certainly sounds alarming that, as reported by the Center of Responsible Lending, about 40% of all subprime loans were issued to Latinos and that 1 in 12 mortgages to Hispanics will end up in foreclosure, these facts lose impact when, as deducted from the numbers above, you take into account that only 24% of the entire Latino population holds a mortgage. Again, if you focus on Hispanic Immigrants, who are more likely to rent than to own their dwellings, this situation's impact is even less dramatic.

Remittances going Down: More than half of Hispanics send money to their family and friends outside the U.S., almost a third of them send it at least on a monthly basis. Given the current economic crisis, it has been estimated that remittances could contract between 3% and 8% in 2008; signaling a temporary redistribution of remittances money while employment patterns recover. Which means Hispanics will send probably less money, less often, to their loved ones in order to be able to continue functioning in this society. The message to their families will be, "Less is better than nothing" given the fact that, as the director of the University of California, San Diego's Center for Comparative Immigration Studies, Wayne Cornelius said, "… immigrants who have lived in the U.S. a few years will stay put because the job prospects are worse back home…" Furthermore, the remittances contraction might not even reach the mentioned numbers, given that Latinos will seek informal channels to transfer money back home, with options such as sending pre-paid cards to family members, a less costly alternative which yet offers more safety than cash to those at the receiving end.

Immigration Slowdown: Even though there are clear signs that the United States has become less appealing given the current economic downturn and the increase in raids against illegal immigrants, the pressure to seek job opportunities in America is not winding down. It is certainly true that there are less Latin American Immigrants coming to U.S. (Mexican emigration has dropped 42% over the last two years), yet the fact is that they are still coming, in lesser numbers than before, but they keep coming nonetheless. For those who continue coming, staying behind would be even worse… for them and well as for their families. All in all, immigration numbers will be lower until the benefits of coming to the U.S. outweigh the risks for those who are currently thinking it twice before heading north.

Concluding, I am in NO way trying to imply that Hispanic Immigrants are immune to an economic recession. They are feeling and will certainly feel the squeeze in the months to come, just the same as they've felt it in the past while living in their home countries. It won't be a novelty in their lives. They've survived through various crises and have successfully emerged from them. To a certain extent they know what to expect, know how to react, and know that they won't last forever. This gives them a somewhat more positive perspective regarding current events, which in turn means that they will hold back less, in comparison to the Average American, when considering acquiring new products or services.

So, to answer the question in the mind of many, "Should I be marketing to Latinos right now?" I respond with an emphatic "YES!" as well as with a couple questions of my own, "Why haven't you started doing so?" or "Why did you stop?" depending on your situation. As many companies withdraw into their trenches, this is the perfect opportunity to make your brand the one that Hispanic immigrants think of first and feel the best about whenever they have a want/need of your product or service category.

Latino Immigrants, for the time being, will be buying less of everything, but in comparison they will be buying more that their non-Hispanic counterparts. From where I stand, it makes perfect sense to reach out to them right now.

Filed under: Juan Tornoe • Race Gender & Politics
soundoff (18 Responses)
  1. Vanesa Duek

    Great piece. Thanks for this information.

    December 3, 2008 at 5:04 pm |
  2. Martha C. Rivera

    Although I am not aware of any "consumer confidence" study focused specifically on inmmigrants, Juan's thoughtful analysis and supporting facts allow to reasonably expect that the Hispanic consumer confidence would remain less impacted than the national average. Also, many marketers who see their customers consistently reduce their spending, would look at the emerging markets as a promising option to explore in order to keep up with their commercial goals. The Latino marketplace would be there for them with its over-indexes on many categories, and its own, specific media and marketing strategies and shopping habits. Interesting to see the reaction of key players such as retailers, and the overall evolution of the marketplace.

    December 3, 2008 at 11:24 am |
  3. FCV Racing

    You nailed it! Great job Juan!!

    December 3, 2008 at 10:23 am |
  4. Jerry Gonzalez

    Great analysis. Thanks for posting and including.

    December 3, 2008 at 9:50 am |
  5. Aida Valenzuela of Crosby

    Please forgive me for I still have spelling and tense errors. Here is what I have to say in regards to the economic crisis USA is going to and my latin experience.
    I would safely say that it is much easier to survive an economic crisis in Lati America, or in Venezuela, where I come from than here is the US.
    I was very poor in American standards when was growing up in Venezuela...but yet I do not remember harship at all. We had chiken and roosters in our backyard, we did not have to ask permission to the goverment to own them, and most certainly the neigbor would not complain because the rooster crwed. They new we shared the eggs of the chickens, and the Gallina Soup. We could sell bread, sodas, and fruits from our house without having to have a special city licence to do so, or without having the health department inspect and shut us down.

    Anyone can build a little ranchito of cardboard, zink, or any other material withou having the goverment trow you on the street for multiple violations. Heck the goverment will help you with materials to build your ranchito, or make your house of mud. You did not have to pay heavy city and property taxes at all, and no bank could come and take your house away, because the land, and your house id yours.

    Sometimes I feel very strongly we came here to this country to find freedom, but there is none. To find a "better way of living" but it is all fake. You have to pay a hefty fine for averything, and the laws are up your throath, that in less you have a steady income, health, or youth, you are in much much much worse shape that in our own countries.

    I have huge backyard. I want to raise my own chickens. I learn to kill them, and cook them back in Venezuela when I grew up with grandmother in a place with no water and not electricity, and yet the happiest days of my life. But guess what the city will not allow me to have a rooster. Not rooster to fertile eggs. I can not reproduce my own food. I have an apple and plum tree, one neigbor complained to the city that we (basically my 12 yearold saving money to buy a new bicycle) were selling fruits without a license. We got a note to fine us 2,000 dollars if we did not stop selling fruits.

    It is going to be very tought to be poor in the country, if we still have rich people laws.

    December 3, 2008 at 3:04 am |
  6. Liz Maestas

    Interesting, very insightful for those that are not clear on the Latino Immigrant, it's definitely a good business case to show my management team in my plea to keep after the Hispanic Market. Although, I see it very different on the streets:

    I work with many small businesses owned by Latinos that are "closing shop" due to the fact that they cannot keep up with vendors, rent and other expenses, they are not making enough to keep going. Arizona small businesses have been hit hard and I'm seeing many close in the Bay Area.

    Also, American businesses are hard pressed to make their 4th quarter numbers. Budgets for Hispanic marketing in these companies are extremely tight as it is and it is always the first budget to get cut. The reason: we need the numbers to 'look good' for the end of the year.

    This is a snowball effect, it will be interesting to see what happens.

    December 3, 2008 at 12:59 am |
  7. Dan Vargas

    This study that you presented is an accurate picture of what the Latino in this country is doing. I work with Latinos in the trenches and noted that everything that you wrote about is true. Their worries are different than that of mainstream. Health I important because with out it you can't work education of their children whether born here or not is important for they live for their children. Family and friends first for that is all they have in this country. I am in total agreement with what you stated about the economic situation involving the Hispanic immigrant, now is the time to reach out to them with your products with the understanding that nothing last forever and the Latino is here to stay and that their children like myself a son of immigrants will always remember who was naughty or who was nice to my parents and I now go out of my way not to deal with companies that treated them badly or disrespected them because as a child I was the interpreter.
    This is something companies should keep in mind.
    Great job Juan!

    December 2, 2008 at 11:21 pm |
  8. Cesar Rincon

    Great piece Juan. when should we expect your book on the Hispanic marketplace in the U.S.?

    December 2, 2008 at 11:04 pm |
  9. Elena Turner

    Juan – great to see a "voice of reason" post like this. Keep it up. We find our clients totally "get it" and are stepping up their Hispanic direct marketing.

    December 2, 2008 at 3:52 pm |
  10. Jean Riquelme

    What is amazing to me, is that the small tiendas in our neighborhood are quite naturally extending credit to neighbors who can't pay this week for food. I guess that's not the really amazing part. The amazing part is that they get paid back.

    People who come from hard times are not surprised when they return. They do not look for government bailouts, even if they were available to to the working poor. They are turinng, as they always have, to each other. In my nighborhood, pay it forward is more than a movie title, it is 10 pounds of rice and a bag of frijoles "until the next time you get paid."

    December 2, 2008 at 3:01 pm |
  11. Matt Reyes

    Interesting to note that Latinos do not often buy into the credit-based society that is America. They are more likely to save-up and keep real assets close to them.

    Debt is frowned upon in Latin America.

    December 2, 2008 at 2:54 pm |
  12. Theresa Rice

    A very insightful piece. Recent immigrants from Latin America don't tend to spend beyond their means: credit is hard to come by and expensive in many of their home countries, so they either cannot or choose not to live beyond their means. That makes them better equipped than many to deal with the current economic downturn.

    Theresa Rice

    December 2, 2008 at 1:17 pm |
  13. Joe in Phoenix

    Very well said on all fronts. Contrary to some misguided beliefs, Latinos are not leaving in droves because of immigration raids, profiling and the economy. I agree in saying that most all recent arrivals and many first generation Latinos are very familiar with an economic downturn; hardship that most Americans haven't experienced before. To them, it means working harder, redirecting focus and priorities but they will continue to improve their lives and the lives of their families...that is priority one for the reason they came here.

    This downturn/recession allows a greater opportunity for smart marketers (smart being the key word here) to reach and tap into this audience right now.

    December 2, 2008 at 1:13 pm |
  14. Joanne, Syracuse, NY

    Yes, all of our ancestors came to the United States for freedom to work hard and achieve. Many built railroads, worked in the sectors of industry that provided new goods and services, carried their pride of home and family, yet, I don't see when and where historically they drained, became a liability, didn't participate in all forms of taxation in order to enjoy the privilege of citizenship. Is this true of the quickly growing Hispanic community?

    December 2, 2008 at 12:51 pm |
  15. Melissa, Los Angeles

    @ Juan it's not only the Latinos that are use to economic downturns – Asian immigrants typically don't have credit card debt and we pool our money together to help each other out (how do you think most of our businesses are started? Not by borrowing from banks.). We've also come from other countries that have a lot less opportunity so many of us have saved in case of a "rainy day" which in this case a lot of days. As for your disclaimer in trying to deflect the negative and racist tone of calling a white person a gringo, I too will in the nicest way possible say that "Beaners" are not the only people who can survive hard times.

    December 2, 2008 at 12:26 pm |
  16. Harold Cabezas

    Well written, Juan, como siempre....

    Not only have we seen it before, or, in my case and many other 2nd Generation Latinos, we have heard it all before from our parents. Our parents have always taught us that nothing is guaranteed in life and that we should be thankful for all the opportunity and material wealth this land gives us.

    Interesting times, but we have seen and can relate to much worse.

    December 2, 2008 at 10:53 am |
  17. Pablo Manriquez

    Good post. I agree that now is the time to build brands in the Hispanic market, or any market for that matter. However, there is one aspect of the crisis that could have the most far-reaching negative impact on Latinos in the US. It is the credit freeze.

    You note that "According to recent data from Experian Consumer Research 58% of the Hispanic population have not used a credit card in the past 30 days, 42% of Latinos don’t like the idea of being in debt, and 31% often pay cash for the things they buy" and that "National Council of La Raza says that up to half do not have a checking or savings account." That said, without credit cards or even bank accounts, Hispanics are more-likely to lack the credit for education loans for their children.

    An unskilled worker is fast becoming unemployable in the American job market. Hispanics must retain the ability to procure education loans the or economic crisis will surely be a catastrophe for the next generation of Hispanic-Americans.

    December 2, 2008 at 10:46 am |
  18. Victor Escalante

    Juan I concur with your analysis and conclusion. Good job!

    December 2, 2008 at 10:39 am |