Latin American migrants send home $45.8bn

Business - FT.com
FT.com
Latin American migrants send home $45.8bn

Mon Mar 21, 5:10 PM ET


By Richard Lapper in Buenos Aires

Economic migrants from Latin America and the Caribbean sent home $45.8bn last year, 20 per cent more than in 2003, according to a report to be published this week. Of the total, at least $8bn (EU6bn, £4.7bn) boosts savings or investment, contributing significantly to the region's long-term economic prospects.


So-called remittances have increased spectacularly since the financial crisis of the late 1990s, as a result of heavy emigration mainly to the US, Europe and Asia. An estimated 25m Latin Americans are living and working outside their countries of origin. In addition, reporting techniques by central banks and other agencies have improved, says the report by the Inter-American Development Bank's multilateral investment fund.

"This was a hidden phenomenon that has now been discovered," said Donald Terry, manager of the fund. "This is a reflection of important trends on world labour markets. Its importance goes way beyond the individuals that send back $200 or $300 a month to their families."

Latin America is the biggest single destination of remittances in a worldwide market estimated to amount to more than $120bn. Mr Terry said that financial institutions, especially micro-finance institutions, were playing an increasingly active role in the market, reducing transaction costs and helping poorer families channel savings towards housing and small businesses.

"The process is profoundly entrepreneurial," says Mr Terry. "Migrant labourers have become such an integral part of the world's labour markets. These are transnational families, living and contributing to two countries, two economies, and two cultures at the same time."

Micro-finance companies have been more active in central America and the Andean countries, partly because regulations there are less rigid than in larger economies such as Brazil.

Competition in a market traditionally dominated by money-transfer companies has forced down transaction costs from more than 15 per cent to less than 8 per cent, which benefits migrants and their families. "We are hoping to cut these costs in half again over the next few years," said Mr Terry.

Mexico received the most from remittances, with the figure for last year of $16.6bn up by 25 per cent on 2003. In some small central American and Caribbean countries remittances are the biggest single source of foreign exchange. In El Salvador (news - web sites) the total received from this source exceeds the gross domestic product. Flows to central America and the Dominican Republic combined topped $10bn, with Haiti, the hemisphere's most depressed economy, receiving more than $1bn for the first time.