Mar 11, 2008
Remittances to Latin America and the Caribbean slower, IDB fund says
Migrant workers sent some US$66.5 billion to the region in 2007, MIF estimates
Latin American and Caribbean migrants sent some US$66.5 billion back to their homelands in 2007, about 7 percent more than in the previous year, according to estimates presented today by the Inter-American Development Bank’s Multilateral Investment Fund (MIF).
“This is the first time since we started tracking remittances in the year 2000 that we haven’t seen a double-digit increase,” said MIF Manager Donald F. Terry. “This is mostly because the region’s two top recipients of workers remittances, Mexico and Brazil, departed significantly from past trends.”
Remittances to Mexico were virtually unchanged in 2007, rising barely 1 percent to US$24 billion. Money transfers to Brazil dropped 4 percent to about US$ 7.1 billion last year.
Terry attributed the slowdown in remittances to these two countries to different causes. In Mexico’s case, its migrants appear to be less inclined to send money home, citing concerns about stricter enforcement of immigration laws and a slowing economy in the United States.
In Brazil’s case, increasing economic opportunities at home and a strengthening local currency (the real has appreciated 24 percent against the dollar over the past 12 months) have reduced the appeal of sending money home for many Brazilian immigrants in the United States.
In contrast, remittances to countries in the Central American isthmus increased 11 percent to US$12.4 billion last year. Money transfers to countries in the Andean region rose 5 percent to US$11.6 billion.
Remittances have become a crucial source of income for many developing countries. In Guyana, these flows represent 43 percent of the gross national product; in Haiti 35 percent, in Honduras 25 percent, and Jamaica and El Salvador 18 percent.
Regarding the recently reported drop in remittances to Mexico (a 6 percent decrease in January 2008 against the same month last year) Terry said that he could not predict whether this decline would continue or even spread to other countries, particularly in Central America.
“We still don’t know for certain whether this is a short-term change or the beginning of a new direction,” he added. “But if it were to become a trend, it will push millions into poverty.”
Most of the money sent by migrants goes to pay for basic expenses such as food, shelter, clothing and medicines. About three-quarters of the remittance flows to Latin America and the Caribbean come from the United States. Spain and Japan are other major sources.
The MIF, an autonomous fund administered by the IDB, originally started to research remittances to analyze their volume and their impact in Latin America and the Caribbean. The fund has promoted competition among service providers, who have considerably cut fees for money transfers to the region over the past few years.
- Peter Bate