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Western Confusion 

With the help of foreign consulates, Western Union poses as a quasi-governmental banking service and rakes in millions from immigrants

Wednesday, Aug 9 2006
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On the first weekend in November functionaries from the Guatemalan Consulate on Market Street will head to Renton, Wash., set up folding tables in a borrowed salon, and thus create a temporary government outpost in that immigrant worker stronghold.

Consulate officials will provide such bureaucratic staffs of life such as fulfilling migrant requests for passport extensions, birth and death certificates, and consular IDs, a type of bank-recognized identification that got its nationwide launch in San Francisco four years ago. The ID card program's aim was in part to help immigrants, some of them in the U.S. illegally, to obtain financial and other services from mainstream providers such as banks, without having to produce U.S. driver's licenses, and without paying the high fees charged by storefront money-wiring chains.

"We tell them there are many services for sending money, and emphasize that they use their ID cards to open bank accounts," says the articulate, patient, and diplomatic Guatemalan Consul General Patricia de Calderon, in her native Spanish.

Guatemalan migrants couldn't be blamed for being confused by de Calderon's advice, however.

At a table nearby a representative of Western Union will hand out promotional literature seeking to convince these Guatemalans not to follow de Calderon's counsel to seek cost-efficient ways to send money home. If recent history is any guide, the Western Union official may have the only information table in the room not placed there by the Guatemalan government, de Calderon acknowledged.

If events at this and other hinterland trips by consulate officials favor Western Union, a good portion of the 200 or so immigrants visiting with consulate officials that weekend will forgo bank accounts and ATM cards — which typically charge a relatively low price of around $2.50 per international transaction — and instead use the company's proprietary, storefront-operated money-wiring service.

The Western Union money transfer service is one of the most expensive available, charging around $13, including exchange rate charges, to transfer $120 from California to Guatemala.

In what would appear to be a conflict of interest on the part of the Guatemalan government — caught between its role of helping immigrants, and abetting a company's efforts to gouge them — Western Union has become the official sponsor of the San Francisco consulate's "mobile consulate" program, where S.F.-based Guatemalan government officials travel to outlying states where immigrants reside away from the home country. This year Western Union will foot the bill for officials' travels to Idaho, Alaska, Washington, and elsewhere in the consulate's service area.

The sponsorship is a logical extension of the company's nationwide "helping hands" initiative marketing to Central American and other immigrants, in which Western Union "creates partnerships with credible third-party sources" so that immigrants become "willing to pay premium prices" according to a marketing strategy outline produced by the public relations firm Bromley/MS&L.

The difference between $2.50 and $13 for a single $120 transfer to Guatemala may not seem like a huge problem. But when assessed as part of the $250 billion international so-called remittance money-transfer business, these high fees can spell the difference between prosperity and continued poverty for developing-world families, villages, and countries.

Happily, when compared to other vexing problems faced by the world's poor, this one has some simple, obvious solutions.

Counteracting Western Union's immigrant-focused PR campaign could mean helping the following message to arrive unfiltered to ears: Believe it or not, when it comes to sending money home to impoverished developing world communities, San Francisco banking behemoths such as Wells Fargo are a working stiff's friend.

That message, it turns out, could possibly be helped along by a San Francisco importer of canned fish.


The stakes behind Western Union's "helping hands" marketing initiative — and countervailing efforts by activists and nonprofits to convince migrants to use cheaper alternatives to wire transfers — are huge.

Surveys show that for every 300 U.S. migrant laborers, around $1 million per year goes back to their home countries. In Oakland, some 30 percent of immigrants use Western Union, as opposed to other methods of transferring money, to wire portions of their paychecks home. While Western Union fees to places like Guatemala and Mexico are high, charges to other countries are exorbitant. When a Philippine immigrant gives $136 to a Western Union agent in San Francisco, a relative will receive only $117 in Manilla, thanks to a whopping transfer and money exchange fee of $19.

Players such as Wal-Mart, the U.S. Postal Service, and scores of independent firms have recognized the profit in the $250 billion international remittance business, and have launched services of their own. And banks such as Wells Fargo have stepped up efforts to cater to immigrants with relatively small bank accounts. Among such steps was a move by banks four years ago to support legislation by San Francisco Supervisor Gerardo Sandoval to require city agencies to accept ID cards issued by foreign consulates. With undocumented aliens unable to obtain U.S. IDs, these cards now double as bank-accepted identification cards around the country, part of a hoped-for market-driven revolution in which immigrants would vote with their pocketbooks for the most cost-effective way to send money home.

Wire transfer services such as Western Union have held up surprisingly well, however. They've lowered their fees somewhat — Western Union, for one, was recently forced by a class-action lawsuit to correct exploitative exchange rates charged consumers. (First Data Corp./Western Union spokesman Colin Wheeler did not return calls requesting comment for this story.)

The company took in $4 billion in revenues last year, the bulk from its money-transfer business, with an astounding one-third of that amount entering the company's coffers as operating profit.

Western Union has competed by relying on its old, proprietary wire system operated out of what the company expects to be some 300,000 locations by year's end, according to Zacks Investment Research. That's 10 times as many worldwide facilities as McDonald's. They've responded to competition by opening even more outlets. And the company has maintained market share by going into PR overdrive.

With the complicity of foreign consulates, Western Union has managed to position itself as something along the lines of a quasi-governmental service.

The company recruited the ambassador of El Salvador to speak at Western Union town hall-style meetings in "New York, San Francisco, Los Angeles, and Houston. All third-party spokespeople were given Western Union talking points," according to a report by the company's PR firm.

Western Union's "helping hands" campaign vexes activists and nonprofit leaders focusing on the remittance issue. The San Francisco consulate sponsorship deal is the latest affront.

"That the Guatemalan government would be facilitating a predatory relationship between Western Union and the Guatemalan community is unconscionable," says Francis Calpotura, executive director of the Transnational Institute for Grassroots Research & Action, an Oakland nonprofit focusing on remittances.

Calpotura's group is holding a conference in San Jose later this month with the aim of establishing a global consumers' union among immigrants who use remittance services. Calpotura envisions a day when migrants transfer, save, and borrow money using credit unions in the U.S. and their home countries. This way, the huge slices taken by transfer companies can be invested in home and business loans in developing world communities.

"The closer the financial service company is to community projects, the better the likelihood that it will benefit families," says Calpotura. "We'd like to see cooperatives, credit unions, micro-credit financial institutions involved in the remittance industry, which is now dominated by money-transfer agencies. We're asking, 'How can these alternative, community-based institutions become players in the remittance industry?'"

Lauren Leimbach is a former finance industry executive who heads up an Oakland nonprofit seeking to popularize prepaid debit cards among migrants. According to this plan, family members back home would also have similar debit cards, and it would be possible to transfer money from one card to another seamlessly and cheaply. Leimbach sees Western Union as a company with an outdated technology that's maintained its business through niche marketing.

Western Union's PR offensive "is good corporate strategy," says Leimbach, executive director of Community Financial Resources. "But it's a strategy without any real social responsibility."


I'm all for the idea of an international remittances consumers' union. And Leimbach's nonprofit-sponsored debit card idea sounds like a good one.

But here simplest solutions may be best.

Migrants merely need to hear a loud and clear message that when it comes to financial services, you'd better shop around.

A small step in that direction would be to counteract Western Union's campaign of promoting confusion about banking among migrants. De Calderon didn't tell me the total value of Western Union's "consulados moviles" sponsorship, saying only that the company pays for consulate workers' travel and hotel expenses, as well as publicity for the far-flung events. De Calderon says the consulate simply doesn't have a budget large enough to pay for this kind of migrant outreach, so every year she has to seek out a sponsor.

That couldn't amount to more than a few thousand dollars, a pittance for a benefactor interested in helping counteract Western Union's specious campaign to be seen as a quasi-public service.

Failing that, de Calderon is working on a solution of her own.

She plans to meet with other companies who might be interested in sponsoring the "mobile consulate" program, including a product sold by San Francisco's own Otis McAllister Inc., a food importer and distributor based on Pier 9 whose founder M. Hall McAllister is immortalized by signs demarking McAllister Street.

"We'll be holding talks with them soon," says de Calderon, adding that they'll discuss the possibility of "La Sirena" brand preserved fish becoming the official sponsor of the consulate's migrant laborer outreach program.

Instead of exorbitant money-wiring services, "they'd be promoting sardines," de Calderon notes.

I can't imagine much harm in that. And if it means disassociating Western Union in immigrants' minds from the good works of their home consulates, it could mean a world of good.

I never thought I'd write this. But here goes.

This column is hereby dedicated to supporting an effort to market sardines.

The fate of the developing world may depend upon it.

About The Author

Matt Smith

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