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Enabling the environment for Diaspora led investments: The Latin America Experience

Enabling the environment for Diaspora led investments: The Latin America Experience. Joint African Institute High Level Seminar Promoting Diaspora-led investments as sources of financing for enhanced growth and development in Africa Cape Town, South Africa, February 06-08, 2008

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Enabling the environment for Diaspora led investments: The Latin America Experience

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  1. Enabling the environment for Diasporaled investments: The Latin America Experience Joint African Institute High Level Seminar Promoting Diaspora-led investments as sources of financing for enhanced growth and development in Africa Cape Town, South Africa, February 06-08, 2008 Manuel Orozco Inter-American Dialogue

  2. The main diaspora and investment context • Understanding the basics of diasporas and development; • Looking at the Latin America and Caribbean experience; • Options and possibilities • Caveats and precautions

  3. Diasporas and Development • Diasporas are a peculiar group with distinct economic activities; • They are not necessarily short of ‘migrants’ and the word should not be used as a euphemistic expression; • Their activities intersect in different contexts with development, investment being one area; • The modalities of investment are also varied: individual [self-interested]; familiar [self-int/altruistic]; community based [altruism]. • Learning to distinguish between preferences and willingness is an essential ingredient of success

  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$3600) Property and other I (US$5,000)

  5. Impact of Transnational engagement To have a practical understanding of impacts, consider the volume of transactions performed by an immigrant. Salvadorans, for example, make 750,000 remittance transfers a month on an average of $330 totaling $3 billion/yr. Similarly, those visiting once a year spent on aggregate $168,750,000/yr.

  6. 50% of Ghanaians travel back home…

  7. Impact on tourist revenue. . . In 2004 total tourist revenue was at U$480,000,000).

  8. Ghanaian nostalgic goods bought… 80 % of remittance senders buy home country goods

  9. Diasporas and development . . .

  10. Latin American migrant’s extent of interest in home country’s economic future . . .

  11. Type of investment a migrant owns back home

  12. Determining the level of Ghanaian engagement and commitment to the homeland

  13. In what activities would a migrant invest:

  14. Ghanaian investment interests…

  15. The realism of investments • Every year less than 5% of migrants or families do invest in some economic activity. • That can be between 10,000 to 50,000 people investing on average of US$7,000 • However the large majority of investments are informal and outside the financial and business systems: use local contractors, local informal lenders, cash payments, etc. • Thus, first step of enabling investment environment for diasporas is to formalize the economy by improving financial access

  16. Concrete experiences worldwide Considerations: 1) policy driven or spontaneous; 2) how they measured success, 3) what factors triggered success, 4) what challenges they encountered, and 5) what solutions did they found to mitigate the challenges.

  17. Investment Model Component a) Financial Intermediation i) Financial literacy: public-private partnership ii) Banks and SCA investment intermediation b) Migrant Outreach i) Confidence building ii) Contact and identification iii) Outreach Program c) Regulatory issues i) Standards in financial access ii) Easing of rules for migrants to access the financial system d) Economic and Social issues i) Investment: business investment plans and partnerships ii) Construction

  18. Implementation steps (a)

  19. Implementation steps (b)

  20. Implementation steps (c)

  21. Implementation steps (d)

  22. Caveats and precautions • Four premises to keep in mind • Impact of remittances is significant • The impact however is not a solution to the challenges of development: Structural problems of poverty and inequality are beyond migration and remittances; and the broader effect depends on the productive base of local economy to absorb foreign savings; • Policies can be implemented that can leverage the economic relationships migrants have with home country; • Any development approach demands a transnational outlook and a gender perspective; • Investment climate is the proxy to attract diaspora investments (political and economic stability); • Realism of the possible is essential • Communication is also important

  23. *. The Limits of the Economic Activities in Promoting Development: a) impact of diaspora activism depends on on the productive base of local economy to absorb foreign savings; b) Diasporas are not rich, they are rather poor groups who in aggregate have someEconomic effects in countries of origin and residence.* understanding the level of engagement diasporas can have in development is crucial* Communication is important: mechanisms to communicate need to exist

  24. Investment climate is essential

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