Remittances to Latin America, Caribbean Countries Topped $45 Billion in 2004

The Inter-American Development Bank (BID) reported this week that money sent by migrant workers in the course of 2004 rose nearly 20 percent from 2003.

Latin American and Caribbean workers living abroad sent a record $45.8 billion to their homelands in 2004, up from $38 billion the previous year, the Inter-American Development Bank´s Multilateral Investment Fund (MIF) informed.

Remittances are typically made by migrant workers in industrialized nations who send $100 to $300 at a time to their families. These flows are a major source of capital for several countries in Latin America and the Caribbean. In 2004, as in the previous two years, remittances exceeded the combined totals of overseas aid and foreign direct investment received by the region.

About three-quarters of the total volume of remittances to Latin America and the Caribbean came from the United States. Europe was the second largest source, while Japan continued to be a major origin of flows to Brazil and Peru, as Canada was in the cases of Jamaica and Haiti.

Mexico remained the top destination, receiving about $16.6 billion last year. Brazil was second with $5.6 billion, followed by Colombia with $3.9 billion. The impact of remittances, however, is greater in the region´s smaller economies. Haiti, the poorest country in the Americas, received just over $1 billion from its expatriates – more than one quarter of its gross domestic product.

According to the MIF´s research, there are some 25 million Latin American and Caribbean-born adults living abroad. About two-thirds of them send money to their families on a regular basis. On a global scale, some 175 million people have left their homelands for economic reasons.

While remittances reflect the growing integration of labor markets, MIF Manager Donald F. Terry noted that this phenomenon is still based on a fundamentally human factor: migrants´ commitment to their families. “These are transnational families, living and contributing in two countries, two economies and two cultures at the same time,” he said.

“The world has adapted to shifts in trade and investments, adopting new political and economic rules to match new realities. The same needs to be done for migrant workers who have become a vital part of the world´s labor markets,” Terry added.

The MIF started working in 2000 on the issue of remittances to assess their economic and social impact in Latin America and the Caribbean. Its research revealed the magnitude of these flows as well as the high transaction costs most migrants were paying to send money to their homelands.

MIF projects have encouraged competition in a market traditionally dominated by money transfer companies, prompting banks, credit unions, microfinance institutions and entrepreneurial innovators to become interested in remittances. Over the past five years, in the case of Latin America and the Caribbean, remittance costs have dropped by half to about 7 percent.

Working with various partners, the MIF is currently financing various programs to link remittances with microfinance, seeking to expand access to formal financial services for millions of migrant workers and their families.