Remittances to Latin America and the Caribbean (LAC) showed a slight increase in 2012 with respect to the previous year, according to the latest report on remittances by the Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank Group.
The report, “Remittances to Latin America and the Caribbean in 2012: Differing Behavior among Sub-regions,” said that the region received a total of $61.3 billion in remittances last year. This amount represents a year-on-year increase of $300 million, a 0.6 percent increase from 2011. After a historic high of nearly $65 billion in 2008, and a 15 percent drop due to the financial crisis in 2009, money transfers to the region have stabilized.
Remittances inflow trends varied among countries in Latin America and the Caribbean. While remittances to South American countries and Mexico decreased by 1.1 percent and 1.6 percent, respectively, the countries in the Caribbean displayed modest growth and Central American nations experienced a significant increase of 6.5 percent in the total remittances received. This increase helped offset decreases in bigger countries, allowing for the region as a whole to end the year with slight growth.
“The latest data show that migrants continue to provide critical financial support to millions of households across the region,” said MIF General Manager Nancy Lee. “The development impact of remittances can be much greater if families have the option to save some of these flows rather than convert them all into cash upon receipt. The new MIF Remittance and Savings program will help identify innovative and commercially viable business models that work for both financial institutions and families.”
The economic uncertainty and sluggish labor market in Europe continue to affect the amount of money migrants in Spain are able to send back home, while the improvements in the labor market in the United States largely explain increases in remittances to certain countries, particularly in Central America.
The value of the money transferred home in 2012 varied from country to country, depending on exchange rates and inflation levels in each country. In Brazil, for instance, the $1.9 billion sent in 2012 represents a 1 percent increase in nominal terms with respect to 2011, but when expressed in local currency terms and adjusted for inflation, the amount represents a 12 percent yearly increase. In other countries, the dollars sent home decreased in value once received, such as in Colombia, where remittance values expressed in local currency terms showed an 8 percent drop.
Mexico remains the largest remittance recipient with $22.4 billion, followed by Guatemala, with $4.8 billion, and Colombia receiving $4 billion, while El Salvador and the Dominican Republic received $3.9 and $3.2 billion respectively.
Remittance flows continue to represent an important source of foreign inflows in many of the countries in the region, and constitute more than 10 percent of the gross domestic product in several countries, including Haiti, Guyana, Honduras, El Salvador, Nicaragua, Jamaica and Guatemala. These flows also represent an important source of income for the millions of families in the region that receive the transfers to cover basic needs and invest in education, health, housing, and small businesses.
The MIF and Remittances
The Multilateral Investment Fund started analyzing remittances in 2000 to gauge their volume and economic impact in Latin America and the Caribbean. Its work promoted greater competition among service providers, which led to dramatic reductions in the costs of transferring money to millions of families in the region. Recently, the MIF launched a Remittances and Savings Program, seeking to increase the access and use of formal savings products among remittance sending and receiving households in the region.