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2005 Remittances to Latin America, Caribbean To Reach $55 Billion

By Eric Green
Washington File Staff Writer

Washington -- Latin American and Caribbean workers living abroad will send about $55 billion in remittances (money transfers) to their home countries in 2005, reports the Inter-American Development Bank (IDB).

In a November 2 statement from Buenos Aires, Argentina, near the site of the upcoming Summit of the Americas, the IDB said its projected figure for 2005 is $10 billion more than in 2004.

Mexico stands to receive some $20 billion in remittances in 2005.  Central American nations and the Dominican Republic, taken as a group, will receive about $12 billion, while Andean countries that receive remittances (Bolivia, Colombia, Ecuador and Peru) will receive about $11 billion.  Brazil and various Caribbean countries also will see significant amounts of remittances, the IDB said.

The remittances often are made in small amounts (typically between $50 and $300 at a time) by foreign workers living in the United States, Europe and Japan.  However, significant amounts of remittances also are being sent between Latin American countries, said the IDB at a news conference ahead of the November 4-5 Summit of the Americas, which is being held in the Argentine city of Mar del Plata.  (See related article.)

Donald Terry, manager of the IDB's Multilateral Investment Fund, said at the news conference that remittances "reflect the reality of labor markets not only in the Western Hemisphere but in the entire world."

"It's established that these flows are a crucial source of income for millions of families.  What we need now is to create the right conditions for this money to have a greater impact on poverty reduction and economic development in migrants' countries of origin," he said.

The IDB said that some 25 million adults born in Latin America and the Caribbean live and work outside their homelands, mostly in industrialized nations with low birth rates and a growing demand for labor.  However, economic migration also occurs between Latin American countries, as is the case in Argentina and its less developed neighbors.

Bolivians, Paraguayans, Peruvians and other Latin Americans living in Argentina send some $500 million home a year, while Argentina receives around $800 million from its own migrants residing in the United States, Spain and Italy, says Manuel Orozco, a researcher with the Washington-based Inter-American Dialogue.

Speaking at the news conference, Orozco reported a sharp drop in the fees that are charged to send remittances to Latin America and the Caribbean.  Orozco said that since the Special Summit of the Americas was held in Monterrey, Mexico, in January 2004, the average fee charged for sending a $250 remittance to the region has fallen from 12.5 percent of the total remittance amount to 7 percent, meaning the cost for sending the $250 remittance has dropped from about $31.25 to $17.50.

At that Monterrey summit, President Bush and the other leaders of the Western Hemisphere set a 2008 goal of cutting the cost of sending home a remittance by 50 percent.  More information about the Monterrey summit and previous summits is available on the State Department Web site.

Orozco said the remittances market has become "increasingly competitive, with a growing presence of participants investing in the money-transfer business.  The main challenges now are to bank the unbanked among people who send or receive remittances, introduce new technologies capable of cutting the costs and expand the supply of financial services."  The term "unbanked" refers to people who do not use a formal banking system, and who may be unaware of how to access the services provided by financial institutions.

At the Mar del Plata Summit of the Americas, IDB President Luis Alberto Moreno will speak about the opportunities for "leveraging" the economic effect of remittances to multiply their development effect in the region.

Moreno will underscore the advantage of using remittances to promote "financial democracy" in Latin America, opening the region's formal financial system to millions of families who lack access to services such as savings accounts, ATM cards, microcredit or home loans.

For ongoing coverage of the meeting in Argentina, see Summit of the Americas.