The Multilateral Investment Fund (MIF) reports this month that Latin America and the Caribbean received an estimated $61.3 million in migrant remittances in 2012. In the new study, “Remittances to Latin America and the Caribbean 2012: Differing Behavior Across Subregions,” the MIF suggests that the weak economic recovery experienced in major remittance-sending markets such as the United States, Spain and Japan is continuing to impact remittance flows to the region. However, despite challenges such as persistent levels of unemployment in host countries, Latin American migrants continued to demonstrate the resiliency of remittance transfers. Stable money transfer practices resulted in a 0.6 percent growth in remittance flows last year.
Migrant remittances are person-to-person money transfers of small amounts—usually between $200 and $400 per transfer depending on the country—and are most commonly used to cover the day-to-day expenses of the recipient families. These small amounts of money add up, and in 2012 migrant remittances to Guyana, Honduras, El Salvador, and Nicaragua represented over 15 percent of GDP. In Haiti, remittances comprised 25 percent of GDP.
While 0.6 percent growth is obviously modest, the MIF reports that certain sub-regions within Latin America and the Caribbean displayed juxtaposing trends in their remittance flows. South America and Mexico actually experienced a reduction in remittances—a 1.1 percent decline overall in South America and a 1.6 percent drop in Mexico. Central America, however, closed out the year with a surprising 6.5 percent gain in remittance volume.
While South America historically has a stronger tradition of migration to Europe than to the United States, both Mexico and Central America are decidedly U.S.-facing, so differences in the macroeconomic performance in remittance-sending countries don’t necessarily explain these numbers. It’s an interesting development, especially when considering that Mexico’s GDP grew by 3.9 percent last year compared to 2.2 percent GDP growth in the United States. Moreover, evidence from the U.S.-Mexico border suggests that the number of Central Americans crossing the border via Mexico more than doubled in 2012, while net Mexican migration has fallen to zero or perhaps even dropped below that.
The MIF report reveals another interesting trend: the upsurge of intra-regional remittance transfers. Remittances to Bolivia, Ecuador, Paraguay, and Peru from neighboring Brazil, Argentina and Chile are having a significant impact in fostering opportunities for recipient families. Recent studies on intra-regional remittance corridors, such as the MIF’s 2009 report on remittances from Costa Rica to Nicaragua suggest that these intra-regional funds may have a greater impact on poverty reduction since migrants to neighboring countries tend to come from lower-income families than those who migrate to the United States or Europe.
The shape and direction of remittance flows will probably continue to change, but it’s clear that these flows are critical to the well-being of the families that depend on them. There are also clear business opportunities for firms such as financial intermediaries, telecoms and remittance service providers as long as they can respond to changing dynamics with the appropriate products and services.
The MIF is doing its part to respond to this opportunity through its new Remittances and Savings Program, which provides financing and technical assistance to institutions offering savings and other financial products and services to remittance clients. Through these strategic partnerships, the MIF seeks to reduce the cost of sending remittances, promote the use of formal channels to transfer money, and foster investments in business, education, health, and housing,. For more information or to get involved, contact remittances@iadb.org.
