Latin American and Caribbean immigrants living in industrialized nations sent more than $32 billion in remittances back to their homelands in 2002, a 17.6 percent increase over the previous year, the Inter-American Development Bank’s Multilateral Investment Fund said today.
“The volume of remittances has grown dramatically. Latin America and the Caribbean is now the number one destination for remittances worldwide,” said MIF Manager Donald F. Terry. “The rate of increase nearly doubled in 2002 and we are getting a more accurate picture of these capital flows because reporting and tracking is improving.”
Last year Latin America and the Caribbean received about 31 percent of the $103 billion sent by immigrants from developing countries around the world to their home countries.
Nearly 78 percent of the remittances to this region came from the United States. Japan, Spain and Canada are other major sources of remittance flows for Latin American and Caribbean countries.
Mexico continued to be the largest recipient in this region, garnering $10.5 billion, or about one-third of the remittances received by Latin America and the Caribbean. Central American countries received a total of $5.5 billion, Caribbean countries received $5.45 billion and Andean nations received about $5.4 billion.
In six countries remittances accounted for more than 10 percent of their gross domestic product: Nicaragua (29.4 percent), Haiti (24.2 percent), Guyana (16.6 percent), El Salvador (15.1 percent), Jamaica (12.2 percent) and Honduras (11.5 percent).
According to MIF estimates, if these flows continue to grow at a moderate rate of 7 percent a year, Latin America and the Caribbean could receive more than $400 billion in remittances during this decade.
By volume, remittances to this region already surpass the amounts received from official development assistance and almost matched the foreign direct investment received in 2002.
According to MIF estimates, the total costs associated with remittances to Latin America and the Caribbean rose to around $4 billion. These costs continue to be the highest in the world by a significant margin, Terry said.
“Costs are higher to send money to Latin America and the Caribbean because banks are less involved in these transactions than they are in other regions of the world,” Terry said. A MIF-sponsored study compared costs of wiring money from industrialized nations to various developing countries and found that Latin America is the most expensive destination.
The MIF also sponsored another study on remittance flows from Spain and found that Latin American workers were sending about $1 billion a year back to their countries from that European nation. Competition from major Spanish financial institutions has forced traditional money transfer companies to cut their fees dramatically, Terry said.
A third study commissioned by the MIF on the impact of recent U.S. regulations against money-laundering and funding of terrorist groups found that the new rules should not prevent financial institutions from offering more services to Latin American immigrants, including those bearing foreign-issued identification documents such as the matrículas consulares issued by Mexican consulates.
The MIF, an autonomous fund managed by the IDB, is scheduled to hold a seminar starting at 9:00 a.m. on Friday, February 28 to discuss these reports and their conclusions.
The MIF promotes private sector development in Latin America and the Caribbean through grants and investments. Among other issues, it works to bring down the costs of remittances by encouraging competition among service providers and by brokering links between financial institutions in industrialized nations and developing countries, with a preference for credit unions and microfinance institutions.