RemittancesGateway.org

Money sent home to Latin America and the Caribbean shrinks 11 percent

Thursday, 18 February 2010 14:46

Source: Medill Reports
By Huong Vu

Before 2009, Javier Theia used to send $120  to his parents in Mexico eight times a year. But now, he struggles to send $80, andthe number of his transfers declined to four times a year.

Since September 2009, Theia, a Mexican employee at a restaurant in downtown Chicago, has seen his work hours reduced from eight or nine per day to six or seven. Consequently, his income decreased.

“It’s bad when I got a cut back,” Theia said. “I want to help my parents more, but I also have to pay the rent, buy food and raise my kids.”

Theia said he’s still luckier than many other Latino immigrants.

“I know many people from Mexico and Colombia losing their jobs,” Theia said. “They can’t send money to their homes anymore.”

The year 2009 was the first time remittances to Latin America and the Caribbean decreased in 25 years. Remittances were down to around $58 billion, 11 percent lower than in 2008, according to a World Bank report published November 2009.

The Inter-American Development Bank estimates that more than three-quarters of remittances to this region originate in the United States.

“Many people who were sending money back home are now unemployed,” said Edwin Silverman, bureau chief of the Illinois Bureau of Refugee and Immigrant Services.

Silverman said that even when immigrants lose their jobs, they are still trying to send money home. Their remittances may be the primary income of the family in their home countries. The immigrants here may end up spending less to send more money home.

“People are spending more consciously,” Silverman said.

A 2009 survey of 1,350 Latino immigrants in the U.S shows that 45 percent planned to send less during 2009 than they did in 2008. Only 6 percent planned to remit more and the rest intended to send equal amounts. The survey was done by the Inter-American Dialogue, a think tank in Washington, D.C.

This decrease in remittance reflects the fact that the U.S. as a key destination country for Latin American migrants started its recession sooner than in other parts of the world, according to the World Bank report.

“When people have lots of discretionary money, they remit more. When things contract and the economy is tighter, they remit less,” said Kristin Johnson, professor of political science at the University of Rhode Island.

“In the past, maybe in 2007 or so, [Latino ] workers, like day laborers, were able to work two or three times a week in a good week, and right now, it’s like two times a month because of the economic recession,” said Elisa Ringholm, development manager at the Latino Union of Chicago. “So it has a great influence on their abilities to send money to support their families.”

Latino workers now have to compete with more people for the few available jobs.

“At the corners of Chicago, you will find day laborers not only from Latin America, but also from Eastern Europe … Mongolia and Korea … and African Americans and white U.S-born citizens as well,” Ringholm said.

Gonzalo Cruz, Southwest Side organizer at the Latino Union of Chicago, said, “People have talked about not being able to send enough money for their families to be able to eat, and here locally they really struggle paying rent because you have to survive as well. So it’s a constant struggle.”

Experts said the decline in remittances also affect the U.S. economy indirectly in terms of decreased  purchasing power in foreign markets for the U.S. exports.

Johnson said remittances allow receivers in Latin America and the Caribbean to purchase goods other than those needed for survival.

“For example, in Haiti a lot of the remittances sent there are actually used for food imported from the United States,” Johnson said. “About 40 percent of the food in Haiti is from the United States.”

The World Bank report, however, is rather optimistic about remittances in the coming years. It predicts the remittance flows to Latin America and the Caribbean will increase from $58 billion in 2009 to $59 billion this year and reach $61 billion in 2011.

Javier Theia is also crossing his fingers.

“I hope that the economy will be better in the next few months and I can work extra hours like before,” Theia said. “Then I can save more money to send back home.”