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 Business News | June 2006 
Western Union Hastens to Mollify Miffed Mexicans
 Oscar Avila - Chicago Tribune
| | Immigrants still prefer to use money-wiring services rather than banks, even though the latter typically offer lower fees. |
Western Union, the money-transfer giant that dominates so many immigrant neighborhoods, has been targeted with criticism and even a class-action lawsuit for taking too much of the money immigrants send home. Now the company is winning praise for adding to the funds flowing to Mexico.
Western Union executives will sign a contract with immigrant leaders and the governor of Michoacan in Chicago on Saturday to help bankroll enterprises in that Mexican state organized by immigrant clubs in the U.S.
Executives pledged to match up to $250,000 raised by clubs of immigrants from Michoacan, part of a larger effort Western Union launched last fall.
Although the Mexican government already matches funds, the initiative reflects a rare foray by the U.S. private sector into this kind of project.
The project spotlights the company's influence among Mexicans, who sent back $20 billion to their country in 2005. Remittances are Mexico's second-largest income source. Immigrants still prefer to use money-wiring services rather than banks, even though the latter typically offer lower fees.
Some Mexicans see Western Union as a good corporate citizen that backs immigrant causes and offers services in neighborhoods underserved by banks.
Other Mexicans, however, say Western Union is merely trying to buy itself back into good standing while still charging high rates for money-wiring.
'Judge us by our actions,' said Fred Niehaus, a senior vice president of Western Union. 'We aren't sponsoring dinners. We are sponsoring real-life, grassroots projects. These folks have helped build our company.'
Immigrant clubs that raise money can apply for triple matching funds, from the municipal, state and federal jurisdictions in Mexico.
Western Union has said it would participate only if the projects are for-profit ventures that create jobs. Currently, most clubs focus on public-works projects, such as athletic fields.
As in the company's other partnerships with immigrant clubs, immigrant leaders will submit projects to company executives for approval. First Data Corp., Western Union's parent company, has pledged $1.25 million for projects throughout Mexico.
First Data's initial partnership projects, organized by immigrants from the state of Zacatecas, recently won approval. Western Union will take full control of all the partnerships later this year after it has been spun off from First Data as planned.
'I don't think this is a tactic to snag more customers. I think they are sincere and that this will promote economic development,' said Ruben Chavez, president of the Michoacan Federation in Illinois. 'If we can create more jobs, crossing the border will be less of a necessity.'
But Mexicans in Chicago have not always viewed the company so favorably.
Customers filed a class-action lawsuit in 1998 against Western Union and Orlandi Valuta, both First Data subsidiaries, alleging that the firms engaged in false and misleading practices by collecting millions of dollars in hidden charges and by misrepresenting those fees in ads.
A federal judge in Chicago eventually approved a settlement in which the firms paid out millions of dollars, including coupons to customers. The settlement also included payouts directly to organizations that served the Mexican community nationwide.
While the company has tried to mend fences, one of the original plaintiffs called the hometown federations traitors for accepting money from a company.
'It's a sellout,' said Luis Pelayo, president of the Hispanic Council in Bensenville. 'This company is trying to buy us off, but they need to make amends first by changing their fundamental business practices. That's they only way we are going to be friends again.'
In a 2004 report, the Pew Hispanic Center found that money-transfer firms still dominate the remittance market even though bank fees are lower.
The report found that Western Union and other firms are lowering their rates, however. For all senders, the average cost to send $200 was 7.3 percent, down from 13 percent in 2000.
Silvio Vargas joined the steady stream of customers at a Western Union outlet in Cicero on Thursday.
If Vargas opened an account at certain banks, he could transfer his $100 to family for little or no surcharge. Instead, he paid $9. Still, the Cicero man prefers Western Union because there is less paperwork and it is easier for relatives to collect money.
'It is a lot less of a hassle,' said Vargas, 30.
Western Union continues to press forward with projects that mix philanthropy and skillful marketing.
'You can get beat up by the [immigrant] community. We also get beat up by the mainstream who are on the other side of this issue,' Niehaus said. 'But if not us, who? There is no one else stepping up.'
oavila@tribune.com |
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