Finance

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Donald Trump, as part of his ongoing rhetoric about the wall he wants built along the U.S.-Mexico border, inadvertently targeted American publicly traded companies this time: MoneyGram International and Western Union.

The billionaire Republican presidential hopeful has insisted that the fence, which would hypothetically stretch for 1,000 or so miles, wouldn't cost the U.S. a dime because he'll get Mexico to pay for it. How? Well, until now, he hadn't answered that question. In so many words, former Mexico President Vicente Fox pretty much said that there's a better chance of pigs flying: "I'm not going to pay for that f---ing wall," is how he put it in a Univision interview.

So what's the idea? In a plan he released to the Washington Post, Trump proposes cutting off the billions of dollars in remittances that Mexican immigrants living and working in the U.S. send back home to family members. This would be quite painful for Mexico's economy: It receives around $25 billion in remittances annually, a large portion of which comes from the U.S. 

Money Flows
Here are the 10 countries that received the biggest remittance inflows based on forecasts for 2015. Trump wants to cut off U.S. transfers to Mexico as a way to force the nation to pay for a border wall.
Source: World Bank

Trump says he would stop this money flow until the nation made a one-time payment of $5 billion to $10 billion to the U.S., for the wall, and he cites the USA Patriot Act antiterrorism law as a way to enforce his idea. Bloomberg Politics' Toluse Olorunnipa writes that it's unclear whether Trump would be able to do this without approval from Congress. Academics and economists told the Washington Post that the effects could be "devastating" for poor families that rely on such funds for food and shelter.

It would be devastating for MoneyGram, too, and to a lesser extent, for Western Union as well. Remittances are the crux of their businesses, which have headquarters in Dallas and Englewood, Colorado, respectively. MoneyGram, whose primary customers are those without bank accounts, had a market value of $312 million on Tuesday morning. Western Union, which processed 14 percent of the World Bank's cross-border transfers in 2015, is valued at $9.6 billion. Its shares were barely changed Tuesday. (MoneyGram has also been considered a takeover candidate for Western Union because of its customer base and as cheaper digital alternatives emerge in the fragmented industry.)

Dollar Problem
Revenue for both Western Union and Moneygram fell last year because of the impact of the stronger U.S. dollar. Competition is also intensifying in the remittance industry.
Source: Bloomberg

How likely is it that Trump's proposal would be enacted? I'll leave that to the same folks opining on whether or not he'll even win his bid for the White House. But holding this money hostage wouldn't just hurt Mexico. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net