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The power of remittances
Today's FT reports that migrant workers sent back more than $62.3bn to their families in Latin America and the Caribbean last year, a rise of 14 per cent on 2005. For the fourth successive year migrants' remittances will exceed the combined flows of foreign direct investment and overseas aid into the region.
Mexico (with a total of $23bn), Brazil ($7bn) and Colombia ($4bn) receive most remittances, but the flows are especially beneficial for the poorer and more marginal countries of Central America and the Caribbean, where they account for more than 10 per cent of GDP in many cases.
Don Terry, head of the Multilateral Investment Fund, the IDB agency that monitors the flows, argues that as 8m-10m families “would be below the poverty line” without the remittances.
However, a clampdown by US migration officials on illegal immigrants could be contributing to a sharp slowdown in growth, Mr Terry claimed. Fearful of showing up at money transfer agencies or banks, immigrants could be choosing to send money back through family members and friends.
The good news, then, is that migrants' true contribution to their home countries is far greater than the $62.3bn figure for officiai remittances. The bad news is that they are being forced to send back money in risky and costly unofficial ways. In short, the benefits of remittances are understated, but they could be even greater.
