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Distant but close: The Impact of Immigrant Remittances on Latin America

Distant but close: The Impact of Immigrant Remittances on Latin America. Manuel Orozco, Inter-American Dialogue May 30 th 2005. The Geography of migration and remittances: distant proximities through transnationalism. Africa South Africa Congo Ghana Morocco Malawi Ethiopia

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Distant but close: The Impact of Immigrant Remittances on Latin America

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  1. Distant but close:The Impact of Immigrant Remittances on Latin America Manuel Orozco, Inter-American Dialogue May 30th 2005

  2. The Geography of migration and remittances: distant proximities through transnationalism Africa South Africa Congo Ghana Morocco Malawi Ethiopia Mozambique Lesotho Swaziland America United States Canada Brazil Mexico El Salvador Dom. Rep. Ecuador Jamaica Cuba Colombia Paraguay Venezuela Haiti Europe France U.K. Germany Italy Belgium Spain Turkey Albania Armenia Greece Portugal Asia Japan Hong Kong Philippines China India Singapore Vietnam Thailand Malaysia Oceania Australia New Zealand Middle East United Arab Em. Saudi Arabia Kuwait Jordan Egypt

  3. The national income equation in Latin America: a rent seeking and courtesan state? GDP: (X-M) + I + G + C -Maquila, Tourism, Non-traditional exports -Transportation, Telecommunication, Nostalgic Trade -DOMESTIC SAVINGS - INVESTMENT -FOREIGN SAVINGS - INVESTMENT -FDI: Transnational capital, migrant capital investment -TECHNOLOGY TRANSFER -UNILATERAL TRANSFERS -ODA- BILATERAL & MULTILATERAL -PRIVATE DONATIONS FOUNDATIONS, PPOs, HTAs -WORKER REMITTANCES

  4. Immigrant economic practices (annual expenses) Capital investment Consumption Family remittances Donations Trade and services retail (US$3,000) Community (US$10,000 year) Household economy (US$270) Property and other I (US$5,000)

  5. Main remittance recipient countries worldwide

  6. Remittances per capita (2001)

  7. The Latin American context The level of engagement The 5Ts

  8. Remittances to Latin America and the Caribbean by Region (%) US$ 45.2 billion

  9. Source: Central Bank of each country. Estimates for Cuba and Haiti

  10. Commitment to families . . .

  11. Length of Commitment . . .Average amount sent and length of time living in U.S.

  12. Percent of remittance senders who . . . Jamaicans: younger with formal education, Bank accounts, higher income and live in smaller households

  13. Caribbean immigrant home country engagement seems greater than other Latin immigrants . . .

  14. Effects and trends in home country

  15. Distributive effect of remittances

  16. Remittance recipient households Source: El Salvador, Honduras and Guatemala: Bendixen and Associates survey; Dominican Republic: Emmanuel Sylvestre & Associates survey (commissioned out by the author); Guyana: Laparkan Trading survey (commissioned out by the author); Ecuador: Mauricio Orbe (PulsoEcuador); Mexico: El Colegio de la Frontera Norte. “Problemas y Perspectivas de las Remesas de los Mexicanos y Centroamericanos en Estados Unidos,” El Colegio de la Frontera Norte: Departamento de Estudios Económicos. Mexico: 2002, p. 30.

  17. Female remittance recipients (%)

  18. Remittance recipient (relationship)

  19. Phone calls to selected Latin American countries Source: Encuesta de inmigrantes en New York; US Census Bureau; 2000 and 2001 International Telecommunications Data, Linda Blake and Jim Lande. Washington, FCC, December 2001, and January 2003. * calculo basedo en un promedio de 4 llamadas al mes por 5, 8, 15, 25 y 30 minutos por llamada Formula utilizada es ∑ de llamadas = minutos anuales * Porciento que llama * Porcentaje inmigrantes que remiten (Censo 2000 de pobl.)

  20. Goods bought by Guyanese diaspora

  21. Products bought by Jamaicans in the U.S.

  22. Counter-cyclical nature: Quarterly flows to selected Latin American countries

  23. Home country variations in exchange rates and unemployment in the U.S. among Latinos do not have an effect on transfers. • Market of transfers occur independently from exchange rate variations: under the economic crisis affecting devaluation, remittance transfers, and the control of its volume by companies, were not related to exchange rates. • Remittances responded specifically to changes in prices Dominican Republic: Remittances, prices, interest and exchange rates R2 = 0.54 adjusted R2 = 0.29, statistical significance p< .10 * , p < 0.05 **, p < 0.01 ***

  24. Jamaica: Macroeconomic determinants

  25. Jamaica and GDP: Remittances, Tourism and Non-Traditional Exports

  26. Levels and determinants of Engagement Comparisons among Latin American and Caribbean immigrants in the U.S.

  27. Level of engagement • Index for extent of engagement • At least traveling once a year; • At least calling once a week; • Buying home country goods; • Helping family with other economic obligations; • Has bank account in home country; • Has a mortgage loan in home country; • Sends over US$350

  28. Determinants of engagement OLS statistical procedure using level of engagement as dependent variable. Other Latin America: immigrants from Bolivia, Cuba, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Mexico, and Nicaragua.

  29. Percent of Latin American and Caribbean people with a tertiary education and living in the US

  30. It costs to be poor and immigrant: Costs to transfer US$200 in remittances in February 2004

  31. Costs of Calling to Selected Latin American and Caribbean Countries Source: Global Cell, AT&T, MCI rates.

  32. Diaspora organizing Hometown associations in Latin America

  33. HTAs are small voluntary philanthropic organizations; • Their organizational structure is commensurate to the groups’ proposed goals; • The activities focus on basic health, education and public infrastructure; • The resources raised are relatively small in volume (US$10,000); • Donations are significant however in rural recipient localities; • Partnership with governments enhance development goals. Philanthropy for the homeland Source: Orozco, Manuel (2003),Hometown Associations and their Present and Future Partnerships: New Development Opportunities? Inter-American Dialogue, Report commissioned by the U.S. Agency for International Development. Washington, DC. September.

  34. Mexican Clubs by State of Origin Source: Orozco, Manuel (2003),Hometown Associations and their Present and Future Partnerships: New Development Opportunities? Inter-American Dialogue, Report commissioned by the U.S. Agency for International Development. Washington, DC. September.

  35. Guyanese and Salvadoran Hometown Associations

  36. Issue identification: Range of Activities in Mexico ( of HTAs working on given project)

  37. Resource allocation

  38. Budget allocation, HTA donations and population (mean values) Source: Orozco, Manuel (2003),Hometown Associations and their Present and Future Partnerships: New Development Opportunities? Inter-American Dialogue, Report commissioned by the U.S. Agency for International Development. Washington, DC. September.

  39. The reality of transnational families Is poverty out of the picture with transnational migration?

  40. Remittance Sender • A person who represents two thirds of immigrants; • Sends regularly, at least seven times a year; • Has an income below $30,000 (65); • Has a basic education below high school (70); • Sends about $3,000 annually; • Has a longstanding commitment with their relatives (at least 5 years); • Uses intermediaries to send money (70); • Does not have a bank account (56)

  41. Remittances from Latin American immigrants in the United States • Sixty percent of Latin American immigrants send remittances; • The average transactions that immigrants send is $240 and do it regularly over twelve times a year. The regularity of the amount is four times more than in 2001. • The aggregate volume of such amounts adds to a little over 30 billion dollars a year from the continental United States; • In six states immigrants are sending at least one billion dollars; • Latinos in California alone send nearly ten billion; • The total volume from these six states adds to twenty-one billion dollars

  42. Personal Income and Years living in U.S.

  43. Remittance senders without bank accounts

  44. Dominican Republic remittance receiving households: Income and years receiving remittances

  45. Remittance receiving households: some financial characteristics

  46. Remittances as Institutions of Development

  47. Opportunities for development • Reduce Costs • Savings, Credit and Banking • Link with hometown associations • Promote nostalgic markets and tourism • Create institutional ties with the diaspora • Link remittances and technology

  48. Strategy 1: Reduction in transfer costs • Promotion strategic alliances between remittance agencies and banks, such as VISA with Quiqeyana, Banco Cuscatlan, Banco Uno y Gigante Express in Central America and the Dominican Republic • Strategic agreements between banks in the country of residence and the country of origin • Bank of America, Citibank (C2iT), etc. • Software Platforms for banks: Mastrex International • ATMs and MAC: Mitchell’s Bank • Alliances among US and Latin American credit unions, such as IRNet

  49. Total cost of remittance transfer by industry sector

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