Dramatic rise in remittances
WASHINGTON, USA — A dramatic rise in the volume and monetary value of remittances sent by immigrants from Latin America and the Caribbean to their homelands, is being reported by the Inter-American Development Bank (IDB).
According to the IDB, immigrants sent more than $32 billion to their native countries in 2002, a 17.6 per cent increase over the previous year. Nearly 78 per cent of the remittances to Latin America and the Caribbean came from the United States, the IDB reported.
Mexico continued to be the largest recipient of remittances in the region, garnering $10.5 billion, or about one-third of the remittances received by Latin America and the Caribbean. Central American countries received $5.5 billion, Caribbean countries $5.45 billion, and Andean Ridge nations about $5.4 billion.
Remittances accounted for more than 10 per cent of the gross domestic product (GDP) in six countries: 29.4 per cent of the GDP for Nicaragua, 24.2 per cent for Haiti, 16.6 per cent for Guyana, 15.1 per cent for El Salvador, 12.2 per cent for Jamaica, and 11.5 per cent for Honduras.
The IDB said that if this growth in remittances continues at a rate of seven per cent a year, Latin America and the Caribbean could receive more than $400 billion in remittances during this decade. Remittances to the region already surpass the amounts received from official development assistance and almost matched the foreign direct investment received in 2002.
One disturbing trend, said the IDB, is that the total costs associated with remittances to Latin America and the Caribbean — meaning the personal financial sacrifice that immigrants make in paying for transfer fees to send money home — rose to about $4 billion. These costs continue to be the highest in the world by a significant margin, the IDB said.
The IDB blamed these higher costs on the fact that banks are less involved in money transactions in Latin America and the Caribbean than in other parts of the world.
An IDB study said that recent US regulations against money laundering and funding of terrorist groups should not prevent financial institutions from offering more services to Latin American immigrants, including those bearing foreign-issued identification documents, such as the matriculas consulares from Mexican consulates.
Sheila Bair, former US assistant secretary of Treasury for financial institutions, said in a 2002 speech that the United States recognised the importance of remittances to Latin America and supported the efforts of the IDB and other groups to improve remittance services at reasonable prices.
Bair said this effort was a particular focus of the Partnership for Prosperity, an initiative of President George W Bush and Mexican president, Vicente Fox, launched during Fox’s state visit to Washington in 2001.
The partnership is a public-private alliance that aims to boost the social and economic well-being of citizens in Mexico, particularly in regions where slow economic growth has fuelled migration.
The United States understands that remittances sent to Latin America and the Caribbean “can serve as a vital piece of foreign aid that goes beyond consumption”, Bair said. “We support any efforts … to make the process of sending remittances more affordable for the people [who] use [them] — most of whom earn low wages to begin with.”
Another former Treasury official, Kenneth Dam, said at an October 2002 conference in Miami that “it costs money to send money” — the cost can be as much as 20 per cent, meaning that an immigrant sending home $250 can pay up to $50 in fees and exchange-rate conversion costs.