Remittances Becoming More Entrenched

The Worldwide Cash Flow Continues to Grow

Hand with money

Money sent home by immigrants is increasingly a part of the global economy. The San Francisco Chronicle reported (6/24/01) that immigrants in the U.S. sent $23 billion abroad in 2000. By 2003, the figure had become $30 billion. In some Central American nations, remittances are more than 10 percent of national GDP, e.g. 29 percent in Nicaragua and 15 percent in El Salvador. According to the International Monetary Fund, remittances have risen to more than $70 billion worldwide every year, an amount greater than total government aid to developing countries.

In Mexico, public works that would be considered the province of government elsewhere may be financed by Mexican workers' remittances sent to their hometowns. In fact, the practice has been institutionalized by el Presidente Fox, who offers matching funds in some cases. Fox, the former businessman, evidently has realized more than most in his position how the remittances maintain the status quo, despite the recent change in ruling parties. These roads and schools are projects that do not require taxation on Mexicans remaining at home. Incidentally, the Mexican ruling class has grown even wealthier in recent years. Forbes magazine reported that Mexicans comprise half the billionaires in Latin America.

The Mexican state of Zacatecas receives $1 million per day from its former residents, according to a local migration expert. That amount is more than what Zacatecas receives from the Mexico City government. Still, some Zacatecans bemoan the new ghost towns, where nearly everyone has left for their better life in the U.S., abandoning rural Mexico. In an interesting twist, some in the area refuse to work in local factories and fields, preferring instead to wait for a check from the U.S. Evidently there are some jobs that Mexicans just won't do.

The Wall Street Journal (5/22/01) did a case study on how remittances had transformed Pozorrubio, Philippines, a town of 60,000. One in 10 people works overseas, from Hong Kong to Los Angeles and New York. Pozorrubio's main street is bustling with new stores and businesses, including a video rental shop and three karaoke clubs. A local banker complains of having too much money and not enough borrowers.

The Wall Street Journal was not altogether positive about the effect of remittances. It cited a study in Mexico showing that about half of the money is used for daily living expenses and consumer goods, with only about 10 percent invested or saved. The easy money of remittances tends to create a cycle in which people have to leave to find work, and no economic development occurs. The brightest and most energetic young people move away, depleting human capital. In Pozorrubio, there is apparently little trickle-down effect for families who do not have a remittance sender, thereby creating a growing income divide of remittance haves and have-nots.

Finally, remittances are funds paid to foreigners and therefore leave the United States. It is money not passing around America, expanding wealth for our own communities. Is our nation so rich that such hemorrhaging can continue indefinitely?

— by Brenda Walker


Tax immigrant remittances
Brenda Walker's op-ed, published in December 2002, suggests that immigrant remittances be taxed at the point of money transfer and the money be used to help struggling border hospitals that are overwhelmed with the cost of treating illegal aliens.

Migrants spur growth in remittances
The Financial Times noted in 2001 that immigrant workers transfer on average $250, eight to 10 times a year, amounting to considerable money over time. Mexico's remittances exceeded 160 per cent of farm exports.

Remittances at Work
One woman interviewed typifies the “circular immigrant” who is integrated into American life and also maintains connections with Mexico through remittances and normal social contact. Mexican President Fox has inserted his government into the remittance practice in order supposedly to distribute the money wisely, an intrusion viewed skeptically by Mexican observers.

Migrant Remittances Sent to Latin America: A Review of the Literature
From the Tomás Rivera Policy Institute and Inter-American Dialogue. Some interesting facts to be found here, e.g., one estimate is that migrants generally send between 6 and 16 percent of their household income to the home countries. Remittances tend to drop off after one or two generations, so new immigrants must be sent to maintain the cash flow.

Sending a Lot of Money Home
The International Herald Tribune considers remittances, noting that “In six Latin American countries, income from remittances represents more than 10 percent of GDP.”

Sending Dollars to Latin America
A major interest of Mexican President Fox is making it cheaper for Mexican immigrants to wire funds home.

Record-breaking amount of money enters Mexico from U.S.
As of October 2001, the money sent as remittances from Mexican immigrants to their home country had already reached $8 billion, a record amount, since previous amounts for entire years has recently been $5-6 billion.

Remittances to Mexico Up 40 Percent in 2001
The dependence of Mexicans on remittances continues to soar — more than one family out of 10 relies on remittances as its primary source of income, according to the National Population Council. Furthermore, the Sept. 11 attacks have not diminished the sending of remittances.

Wiring cash costly for immigrants
The high charges for sending remittances have caused some immigrants to come up with cheaper ways to send money to their homelands.

Villages try creating jobs with emigrants' money: Mexican towns get startup funds, but lack savvy
Remittances provide seed money for local businesses, but poor skills mean success is not guaranteed.

Senate Testimony on Remittances, Feb 2002
The testimony notes that "Today's total remittances from the U.S. to Mexico, Central America, and the Caribbean are estimated to be at least $15 billion annually." Nicaragua's remittances constitute one-quarter of its income. Excellent information.

The View from Afar
From the Economist, this article considers the brain drain, as well as the cash inflow, and other complexities. It also mentions globalist Mary Robinson's description of herself in 1990 as President of the Irish throughout the world.

Latino Remittances Swell Despite US Economic Slump, Feb. 2003
The American economy is in the tank, but Hispanics evidently have plenty of excess cash to be sending to relatives at home. This article also notes how remittances have become big business for money transfer companies.

North Carolina credit union banks on immigrants
This article brings up so much that is wrong, in particular the U.S. Treasury giving the credit union a $1.3 million grant to expand its services, including those to illegal aliens. Also, the Durham, NC, credit union assisted in sending $1.1 million overseas in 2002, money lost to the local economy in the ongoing recession.

New Jersey: Hundreds of Central Americans can stay
This local report about the extension of Temporary Protected Status (TPS) for Hondurans in Hudson County has some interesting facts, e.g., remittances to Central America in 2002 amounted to $5.5 billion. In Nicaragua, remittances that year supplied 29.4 percent of the country's gross domestic product, 11.5 percent in Honduras and 15.1 percent in El Salvador. Note: TPS was in response to Hurricane Mitch, a very destructive storm that caused the deaths of several thousand in Central America in 1998, but five years later, the countries don't want their people back because they want the easy money.

Remittances up by 40 percent
In 2001, Mexico's National Population Council estimated as many as 1.3 million homes -- more than one out of 10 families -- depended on remittances as their main source of income.

Remittances to Mexico up 29 percent (July 2003)
US economy shrinking, American unemployment up, but remittances increase. There's no shortage of work for those happy to be exploited.

Mexico central bank: Money sent home by migrants surpasses foreign investment, tourism
Remittances continue to increase Mexico's financial dependence on the kindness of expatriates. But some Mexicans have noticed that the money goes for daily necessities rather than investment that would provide employment. Roberto Madrazo, leader of the opposition Institutional Revolutionary Party (PRI), criticized the Fox government for endless emigration, remarking, "This is a clear indication that we are on the threshold of a social crisis," he said.

Money remittances "instant remedy" for Latin American economies
Despite some obvious translation problems (e.g. "Venezuela received 235 billion dollars"), this article still makes clear how the dependence on easy money is growing.

Remittances are Mexico's biggest source of income, says Fox
Remittances "are our biggest source of foreign income, bigger than oil, tourism or foreign investment," Fox told reporters Sept. 24, referring to the increasing cash sent in 2003, even with a stagnant US economy overall. He also noted that money transfers grew after Mexican consulates started giving identity cards to their citizens in the United States. "The cards are working. All doubts have been cleared up. Almost 2.5 million people have them, and we want all Mexicans to have them."

Study: Broad swath of Mexican society receives money from the United States
New calculations (Oct. 2003) have determined that Mexico actually receives upward of $14.5 billion from remittances annually. Previous studies have overlooked money sent by mail or simply carried home. The report also found 78 percent of remittance receivers spend the money on daily expenses. Eighteen percent of Mexicans regularly receive remittances from the United States.

Minimum wage jump welcomed
This article about San Francisco's vote to raise the minimum wage includes some interesting details about remittance habits. One Filippino couple announced that the increase would allow them to send more money home, already $300 out of $1500 monthly. "They depend on us. What we send to them pays for their kids' school tuitions and for household costs." Did San Franciscans know they were voting for more money to leave the American economy?

Mexico's Rich Don't Like To Pay Taxes -- They Think You Should
Mexico is a wealthy nation, with the highest GDP in Latin America, but it pretends to be poor to get more border and illegal alien concessions out of the United States. Part of Mexico's money scam is the $14.5 billion in remittances it gets annually from its exported poor people. The easy money keeps the corrupt rich in power and prevents long overdue political and economic reforms.

Latin American Financial Statistics
Here are the headlines for 2001: Mexico #1 in Gross Domestic Product in Latin America; Mexico #2 in GDP per capita behind Argentina.

Remittances: an economic lifeline or a liability?
There is a dissenting word among a few economists about the advantage of remittance flows. Ralph Chami and Samir Jahjah of the International Monetary Fund Institute published a controversial paper noting that remittances may reduce the incentive to work and may even depress economic activity in some nations. More dependent, dysfunctional nations: In Somalia, money sent from abroad accounts for 22.5 percent of household income, and Bangladesh's worker remittances reached $2.5 billion, or 18.9 percent of GDP, in 2001-02. But tiny Tonga was the winner of the check-cashing sweepstakes, where remittances amounted to 39 percent of GDP.
  Download the original paper here.

Immigrants' cash clout
This article includes an interesting detail about Mexicans who pooled $10,000 of their remittances to build a high school in their home town. Such an expenditure would be the job of the government in any normal country, but Mexico is not a normal country. If it weren't for open borders and remittances, Mexicans would be demanding that their government provide a normal level of services and public investment. But Mexico's elite oligarchs have the nation's expatriates trained very well indeed.

Immigrant Mexican philanthropic groups turn toward politics
"A decade ago, a small group of immigrants from Mexico united to send money back home for a bakery, baseball diamond and sewer system in their mountain village of Jalpa." Now they have become more organized, although no smarter in terms of how they are being systematically snookered by Mexico's richie rich.

Migrant plan vital to Central America
President Bush's January 2004 proposal of a general illegal alien amnesty has the rich freeloaders of Central America drooling even more than their counterparts in Mexico. Expatriate legal immigrants and illegal aliens send home some $5.5 billion annually that accounts for nearly 30 percent of the economy in some Central American countries, e.g. Nicaragua (with the lowest per-capita income in Central America) where remittances account for 29 percent of the national economy. Other stats include: Remittances account for 15 percent of the GDP in El Salvador and 11 percent in Honduras. Twenty-eight percent of adult Salvadorans get remittances.

El Salvador Payback
PBS called remittances "El Salvador's biggest industry" as of 2004. But the money is spent on consumer goods rather than invested. A young architect complains, "We think that all of this money [the remittances] flooding into the country from the States is in a way corrupting. It's turning us into a nation of consumers. Studies show that the money that comes in is not invested productively — it's spent at the shopping malls."

Remittances from Vietnamese expats at a record high
Preliminary figures for 2003 show the remittance level was $2.6 billion, an increase of 20 per cent over 2002 and the highest ever. The State Bank of Vietnam reports more than 90 per cent of the money came from the United States, France, Canada and Australia. More than 2.5 million Vietnamese people live outside the country with about one million of them in the US.

Emigration brings dollars home but leaves Mexican town behind
The town of Jaripo has largely relocated to Stockton, California, and the remittance cycle is the same old, same old. An improved shell of a community is built even as the people exit and send back money, leaving a fancier ghost town. The people mean to return to their gated homes to retire, but few ever do. Remittance money is not invested in any sort of infrastructure, so when the family connections peter out, the cash will stop and the town will die.

Remittances to be taxed — By Mexico
The author of this website has previously recommended that immigrant remittances be taxed to pay to some of the expensive social services which illegals consume. Now the idea has been adopted, although not by the United States, unfortunately.

The remittance lifeline 3/04
The BBC takes a cursory look at the worldwide picture and compares the benefits versus the costs. According to 2001 World Bank figures, the United States is the top "host" nation and lost $28 billion in money send abroad, followed by Saudi Arabia ($15.1B) and Germany ($8.2).

Interactive Remittance Map of USA
The Inter-American Development Bank presents a state-by-state view of how much money is being drained from our communities and sent to Latin America as of 2004.

Immigrant rights group wants visas for Salvadoran children   [3/26/05]
Salvadorans residing in the U.S. under the "Temporary Protected Status" (TPS) program are becoming more settled, and therefore more demanding, even though they are theoretically booked to leave Sept. 9, 2006, at the end of their TPS vacation. Plus, no estimate is made of the cost to the overburdened American taxpayer to provide education etc. for the little Salvadoran kiddies.
    Salvador's leaders don't want the TPSers back at all, preferring the expats' remittance cash to their presence. PBS calls remittances "El Salvador's biggest industry." But thoughtful economists have criticized remittance dependence, arguing that billions in easy money does not encourage development and can even depress economic growth in some countries.

Lou Dobbs Tonight - Transcript, March 21, 2005
Remittances are projected to overtake oil revenue as Mexico's #1 source of foreign exchange sometime in 2005. No wonder open borders are high on el Presidente Fox's "to do" list.

    The Mexican citizens cross our border illegally. Some of them find work, and many of them send their earnings back to Mexico. Those earnings have added up to nearly $17 billion in the past year. Remittances, as they're called, are expected to become Mexico's primary source of income this year, surpassing the amount of money that Mexico makes on oil exports for the first time ever.

First Data and Its Congressman Clash Over U.S. Immigration
First Data owns Western Union, which made made $1.1 billion in 2004 from money transfers including immigrant remittancess sent back to their home countries. The company is therefore no friend of Rep. Tom Tancredo, who believes that the nation's border and immigration laws should be enforced. First Data in fact donated to Tancredo's opponent, Joanna Conti, in 2004. Furthermore, Tancredo has suggested taxing remittances, although not with any great fervor. But any cut into remittances would likely decrease First Data's enormous profits.


© 2005 Brenda Walker. All rights reserved.