Oct 18, 2006
Migrant remittances from the United States to Latin America to reach $45 billion in 2006, says IDB
New study estimates 12.6 million immigrants are sending home more money more frequently
Latin American migrants working in the United States will send around $45 billion to their homelands this year, up from some $30 billion in 2004, according to a report released today by the Inter-American Development Bank.
The report, which covers 48 states and the District of Columbia, is based on a survey commissioned by the IDB’s Multilateral Investment Fund and conducted among 2,511 adults born in Latin America and working in the United States.
The money sent by migrants from the United States to Latin America represents about three quarters of the $60 billion this region will receive in remittances in 2006. Other major sources are Europe and Japan.
At a news conference, IDB President Luis Alberto Moreno noted that while remittances continue to grow as a source of income for developing nations, the survey suggests that around 90 percent of the money earned by Latin American migrants remains in the United States, contributing to local economies.
Latin American immigrants in the United States have a total estimated income of more than $500 billion. Some 12.6 million (73 percent of all adult Latin Americans living here) send money home regularly, averaging about 10 percent of their earnings.
“The large increases in remittances from certain states also underscore the fact that members of this young foreign-born workforce are ready to move to wherever jobs are, giving the U.S. economy an edge of flexibility no other industrialized nation can match,” said Moreno. “They are also proof of migrants’ strong commitment to family and community.”
Pollster Sergio Bendixen, whose firm conducted the survey for the MIF, said the results indicate that Latin American migrants are not clustering around traditional communities defined by nationalities but increasingly going to wherever jobs become available.
When compared with a similar survey conducted in 2004, the new study illustrates the changing patterns of Latin American migration in the United States. States that have long had large Hispanic populations (California, Texas, New York and Florida) still are the biggest sources of remittances to Latin America, but some of the largest increases in volume of transfers took place in other parts of the country.
Georgia, Virginia, Maryland, Pennsylvania, Tennessee, Indiana, Wisconsin, South Carolina, Arkansas, Kansas, Kentucky, Nebraska and Iowa saw increases of more than 80 percent over the past two years.
At 260 percent, New Mexico posted the largest increase in remittances volume, from $103 million in 2004 to $370 million in 2006. According to Bendixen, that rise reflects the influx of Latin Americans attracted by the state’s booming tourism and services sectors.
Louisiana experienced the second largest increase, about 240 percent, from $61 million in 2004 to an estimated $208 million for 2006. Its population of Latin American migrants nearly doubled during that period, as many laborers arrived to work in reconstruction after Hurricane Katrina.
A majority of migrants (56 percent) said they did not have a full-time job in their homelands when they moved to the United States. Most of them found employment within a month of arriving here; 38 percent said it took them less than two weeks.
The average salary for a migrant’s first job is around $900 a month, which is about six times more than what they were earning in their countries of origin, if they were employed. By U.S. standards three out of every five of these migrants are “working poor,” making under $30,000 a year. More than half of them are under 35 years of age.
MIF Manager Donald F. Terry observed that, given the contrasting demographic trends in developing countries and industrialized nations, it is likely that the foreign-born population will continue to grow in the United States as native-born workers retire in greater numbers.
“If the U.S. labor market is going to continue to expand, more workers will have to come from outside of the United States. That’s the reality of the world today,” Terry said.
In separate focus groups with people who send or receive remittances, Bendixen found a growing number of migrants interested in investing in Latin America. Traditionally these transfers have been used to meet daily expenses. In a 2001 survey, only five percent of respondents said they had made investments in their homelands; in the focus groups about one third of the participants said they have put money into real estate or small businesses in their countries of origin.
The survey was carried out earlier this year and has a margin of error of two percent. The focus groups included immigrants in New York, Miami and Los Angeles and people who receive money transfers in Mexico, Colombia, El Salvador, Guatemala, Ecuador, Dominican Republic and Haiti.
IDB, MIF and Remittances
The Washington, DC-based IDB is the leading source of long-term lending for economic and social development programs in Latin America and the Caribbean. Its Multilateral Investment Fund promotes private sector development in the region, with an emphasis on microenterprise and small business.
The MIF started studying remittances in the year 2000, when they were largely overlooked by international agencies and national governments. Besides gauging the real volume and impact of these flows in Latin America and the Caribbean, it also highlighted the high costs migrants were paying to send money home due to a lack of strong competition and a lack of information among consumers.
Over the past years the MIF has encouraged more service providers to enter the remittances market, particularly banks, credit unions and microfinance institutions focused on lower-income clients. Since 2000 the average cost for a $200 transfer to Latin America has fallen from about 15 percent to 5 percent. Migrants and their families have kept billions of dollars that would have gone to fees and foreign exchange commissions.
The IDB and the MIF are now seeking to bring more families who receive remittances into the formal financial system in order to expand their access to products and services that can help them build and protect assets, such as savings accounts, insurance, business loans and mortgages.