RemittancesGateway.org

* Remittance flows to Latin America fall sharply

Wednesday, 12 August 2009 08:26

Source: Financial Times
By: Naomi Mapstone

Remittance flows to Latin America and the Caribbean will drop by 11 per cent in 2009 to $62bn, the lowest level since 2006, according to research carried out by the Inter-American Development Bank.

"The decline will have a direct effect on more than 1m households in Latin America and the Caribbean, half of which are in Mexico," says the IDB report, published today.

El Salvador, Honduras, Haiti and Nicaragua - all countries with greater dependence on the export of manual labour - are among those worst hit.

Ecuador, a dollarised economy which has a high proportion of workers living in Spain and in the US, has also been particularly hard hit, with a 22 per cent decline in remittances in the last quarter of 2008 and a 27 per cent decline in the first quarter of 2009, according to Robert W. Meins, remittances specialist at the International Fund for Agricultural Development.

Mr Meins said the outlook for Latin America and the Caribbean region could be even more bleak, with a decline of 12.4 per cent, or $8.5bn (€6bn, £5.2bn) for 2009, given the region's strong links with the US and Spanish economies.

"The inflow of new immigrants has likely slowed as the jobs that drew them have evaporated and border security has tightened," Mr Meins added.

"Those who have migrated will find it more difficult to find work, and will be paid less than they were when the economy was doing well. This will also lower their future income earning potential."

Manuel Orozco of the Washington-based think-tank the Inter-American Dialogue - and the author of the IDB report - found that, as the international financial crisis deepens and unemployment increases, fewer migrant workers are sending less money home less often.

"Among those in the labour force, 40 per cent are sending less money than in 2008. Among the unemployed, only 25 per cent continue to remit," said Mr Orozco, who wrote the report in collaboration with IDB specialists Natasha Bajuk and Gregory Watson.

About 45 per cent of those surveyed for the report said they expected to send less money home in 2009, compared with only 8 per cent who were sending less money home in 2008.

In the US, Dominicans and Cubans appeared to be the worst affected, with 60 per cent and 52 per cent respectively saying they would send less money home this year.

Mexicans and Ecuadoreans appeared to be more resilient, with 70 per cent and 60 per cent respectively saying they expected to maintain their level of remittances.

In spite of the pressures, migrants were more adaptable to financial pressure, restricting their spending, tapping savings and taking on extra jobs in order to keep paying money to their families at home.

Only a third of migrants surveyed said they were considering returning home within the next five years, and most were motivated by a desire to be reunited with family, rather than economic concerns.