Remittance senders and receivers: tracking the transnational channels

According to IADB, total remittances are due to surpass foreign direct investment as a source of capital for Latin America and the Caribbean in 2003. The total aggregate of remittances to Latin America and the Caribbean during this decade is conservatively projected to reach more than $450 billion. In order to better understand these developments at the micro level, this paper presents findings of research into remittance sending and receiving from some 12,000 individuals in the United States and Latin America.

The paper finds:

• wire transfer companies such as Western Union or Money Gram remain by far the most common means of dispatching remittances with 70 percent of senders reporting that they use such firms. Banks are used by 11 percent and 17 percent of senders use informal means such as the mail or individuals who carry the funds by hand
• broad sectors of the adult populations in all the nations studied are receiving remittances: 14 percent in Ecuador, 23 percent in Central America and 18 percent in Mexico
• remittance flows were largely unaffected by the U.S. economic downturn of 2001-2002. In every country except El Salvador, more than half of the recipients reported that they had started getting money from relatives abroad over the past three years
• while in other countries remittance receipts are still concentrated in the lower rungs of the socio-economic ladder, in Mexico remittances are flowing to all sectors of Mexican society and to virtually every region. Most significantly, in Mexico there were no statistically significant differences between remittance receivers and the general population in age, educational profile or income distribution
• the one characteristic that clearly distinguishes remittance receivers from the general population in all the countries studied is that a majority are women

The paper finds that remittances play an important role in keeping large numbers of working-class families from slipping into poverty. Although most of the money goes for food and rent, anywhere from a quarter and a third of remittance recipients report putting some of it into savings, educational expenses or small investments. Given the size of the flow, the fraction of total remittances destined for these uses far exceeds the economic aid and development assistance that wealthy countries like the U.S. are putting into the region. Migration is therefore not only a “safety valve” that offers alternative opportunities to workers who could not find jobs in their home countries, but has also become an important source of sustenance for those that remain behind and a significant source of income for Latin American economies.