Although remittances from to Latin America rose in 2007, the sluggish nature of the increase has drawn concern. For the first time in seven years, the growth rate of money flowing from Latin American and Caribbean migrants to communities in home countries failed to hit double digits. According to a March report by the Inter-American Development Bank’s Multilateral Investment Fund (MIF). Latin America and the Caribbean received $66.5 billion in 2007—an increase of 7 percent over 2006.
Despite the slowdown, funds sent home by Latin American and Caribbean immigrants topped the combined total of foreign direct investment and foreign aid to the region for the fifth year in a row. Some see the remittance deceleration having an impact on development and poverty alleviation. “[I]f it were to become a trend, it will push millions into poverty,” said MIF Manager Donald F. Terry. As Washington Post columnist Marcela Sanchez notes, “Latin Americans don’t have to read macroeconomic indexes to feel the pinch.”
Mexico, the region’s largest recipient of migrant funds, experienced one of the steepest slumps, with remittances rising by barely 1 percent in 2007 to $24 billion. In January 2008, the country witnessed a decline of nearly 6 percent from the previous month—Mexico’s biggest drop in remittances in 13 years.
The slowing U.S. economy has been blamed for the change. As the Los Angeles Times reports, the sub-prime mortgage crisis struck the job market in the building trades, which employ an estimated one in five Latin American migrants. Furthermore. U.S. Congress’ failure to approve a comprehensive immigration reform package in 2006 led to an increase in state and municipal immigration legislation. An AS/COA immigration update examines the confusing patchwork of state immigration laws, many of which target undocumented immigrants. As New York University law professor Cristina M. Rodríguez writes in a recent article for AS/COA’s Viewpoints Americas, last year “state legislatures across the United States considered over 1,000 pieces of immigration-related legislation.” An October 2007 article by the International Herald Tribune emphasizes the impact of the lackluster U.S. economy combined with a crackdown on undocumented immigration on remittances to Mexico.
However, an analysis by Newsweek’s Why It Matters blog says the remittance slowdown also could signal success for Latin American economies: “While the U.S. founders, most other economies in the Americas are if not ‘decoupling’ from the mothership then holding up gamely in headwinds.” The IDB report indicated the deceleration of remittances to Brazil—the region’s third main recipient—resulted in part from the growing strength of the country’s currency against the dollar. In an AS/COA Online interview, JPMorgan’s Managing Director and Global Head of Emerging Markets Joyce Chang says the region “is more insulated from a United States slowdown than at any time in recent history” and that Latin American countries are increasingly borrowing in local currency markets. Furthermore, the strength of the Euro appears to be drawing migrant funds to Latin America, with a higher percentage of the region’s remittances coming from Europe.
An op-ed in the Boston Globe looks at opportunities for leveraging remittances for development, focusing on remittances from Massachusetts, a state accounting for one of the country’s largest Brazilian immigrant populations. A 2007 report by the World Bank looks at remittances worldwide, focusing on the role of migrant funds in matters including poverty reduction, education, health, and investment in capital assets and small businesses.
