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East, Latin American and Caribbean: New migrants spur growth in remittances
Worker remittances to Latin America and the Caribbean are playing a growing role in many economies and last year surpassed Dollars 20bn for the first time, according to new estimates. A study by the Multilateral Investment Fund, created in 1993 to encourage private-sector development in Latin America, estimated that remittances to the region are expanding at an annual rate of 7-10 per cent, spurred by new migration. The level of remittances exceeds aid flows to the region and is equal to almost a third of the region's foreign direct investment (FDI). In six countries, remittances exceed 10 per cent of gross domestic product: Haiti (17 per cent), Nicaragua (14.4), El Salvador (12.6), Jamaica (11.7), the Dominican Republic (10) and Ecuador (10). Mexico's remittances exceed 160 per cent of farm exports, are equal to tourism revenues and are equivalent to two-thirds of oil revenues. Salvadorean workers send home nearly seven times the country's FDI. Remittances to the Dominican Republic are three times agricultural exports, while those to Colombia are the equivalent of half its coffee exports. The study comes ahead of a two-day conference starting today in Washington on the impact of the transfers on the Latin American and Caribbean economies. The fund, which is administered by the Inter-American Development Bank, is hoping to use the conference to promote efforts to reduce the high cost of transfers and to intensify popular participation in financial systems. With workers transferring on average Dollars 250, eight to 10 times a year, such remittances involve some 80m separate transactions. According to Donald Terry, manager of the fund, transactions costs run between 15 to 20 per cent of the funds remitted, meaning poor workers are paying several billion dollars a year in transfer fees. A typical transfer charge through Western Union is about Dollars 29, while a further 5-6 per cent may be charged in foreign exchange fees by the receiving bank. The average Latin American worker in the US makes Dollars 26,000 a year, with the average worker from Mexico and Central America earning about Dollars 21,000. "Most of these transfers are from poor people in the United States to very poor people in Latin America," said Mr. Terry. Mexico is by far the largest beneficiary from remittances, receiving in 1999 some Dollars 6.80bn, followed by Brazil at Dollars 1.90bn, and the Dominican Republic (Dollars 1.75bn). El Salvador comes next at Dollars 1.58bn followed by Ecuador, the country showing the most rapid growth of remittances because of new emigration, at Dollars 1.2bn. These 1999 figures, taken from official International Monetary Fund and World Bank statistics, are viewed as significant underestimates of actual transfers. They were adjusted - using a conservative estimate of 15 per cent under-reporting - to arrive at last year's figures. The study does not deal with Cuba, where remittances are estimated at a further Dollars 1bn a year. Most remittances come from the US where, according to last year's census, 14.5m people were born in Latin America or the Caribbean, five times the number of two decades earlier. But remittances from other countries can be significant: an estimated 250,000 Ecuadoreans live in Spain. |
