Generosity at Bay

In the last decade a new worldwide financial trend has emerged. It is associated with around 150 million immigrants sending money back to their home countries. The total amount for 2006 was estimated at $300 billions, up from $18.4bn in 1980. To make a comparison, the Iraq war has cost approximately $200bn every year since 2002. This trend, known as remittances has been particularly important in Latin America. By 2006, when the trend peaked, the total amount sent by Latinos living in the U.S. was close to $68 billions.
Remittances are yet another example of how Hispanics living in the U.S. have become increasingly connected to their countries even if not living there. Someone has called remittances the human face of globalization. Of the $67,9bn sent by Latinos the Caribbean comprised $8,3bn, Central America $11,0bn, Mexico, the lion’s share with $24,3bn and South America $24,2bn. Nearly one Mexican in five regularly gets money from relatives employed in the United States, making Mexico the largest repository of such remittances in the world. Taken by size, however, it is in countries such as El Salvador and Guatemala in Central America where the impact has been greater. 57% of immigrants from El Salvador send remittances every year amounting to 17.1% of Gross Domestic Product. In the last few years remittances to El Salvador have roughly represented 133 percent of all exports, 655 percent of foreign direct investment, and 91 percent of the government budget.
Experts consider remittances a simple way to tackle poverty alleviation given that the money sent to places sometimes very remote is used both for consumption and for small investments, contributing to grass-root economic development. Typically, immigrants from Latin America have been unskilled workers with average monthly incomes of around US$160 in their home countries. In the United States their average income is ten times that figure, around US$1,600 a month.
An interesting aspect about remittances is that for the families sending money from places like the U.S. it involves postponing or renouncing altogether to the possibility of buying a house, for instance, or sending their children to college. It gives an idea about how the notion of prosperity is a shared one which goes beyond the border of the individual family.
Money is not sent only by individuals. Remittances by hometown associations to communities in their home countries have been used for infrastructure, like parks, church and roads. Mexico has a “Tres por uno” program, which matches three tax dollars for every one dollar donated to a regional government. So there has been increasingly quite a lot of improvisation on how to use the inflow of funds.
HOWEVER, not everything looks rosy. The current economic slowdown has affected remittances. Less and less Latin Americans are sending money home on a regular basis from the U.S. to their countries of origin, according to a survey on remittances commissioned by the Inter-American Development Bank’s Multilateral Investment Fund (MIF) in early 2008. Only 50% of those responding were still sending money regularly to their families, down from 73% in 2006. Worse, the adverse economic environment is not the only factor affecting the slowdown in remittances. Millions of Latin American immigrants are fearful about their futures in the United States and no longer feel they can afford to send remittances to their families. Many among them argue that the growing intimidating environment against immigrants is another factor in their uneasiness about committing themselves to such an economic effort. In contrast with the results of the first survey on remittances conducted in 2001, when only 37% of respondents said they considered discrimination against immigrants a major problem, in the latest survey 68% said it was a great concern.
The largest drops have taken place in Pennsylvania, Texas, Georgia, Maryland and Virginia. On the contrary, states with the largest expected increases are Nevada, Colorado, Washington, Massachusetts and California. In Mexico the reduction left at least two million people without the financial help they had once received.
Let’s hope that the current slowdown in remittances will not create chaos in places like El Salvador, or affect political stability, which had a high cost in human lives only a couple of decades ago.