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Immigrants From the Americas to Send $50 Billion Home in 2005

Officials say financial system reform needed to benefit from remittances

Posted: October 18, 2005

Washington -- Latin American and Caribbean immigrants working in the United States and elsewhere abroad will send an estimated $50 billion to their home countries in 2005, reports the Inter-American Development Bank (IDB).

In an October 17 statement, the IDB said, however, that these money transfers (known as remittances) sent by immigrants largely bypass the financial systems of their home countries, limiting their development impact.

Because of this, the IDB said it will support the "leveraging" of remittances to Latin America and the Caribbean to generate "concrete progress" for the region and its inhabitants. Leveraging refers to using a small amount of funds to attract other funds, including loans, grants and equity investments.

The IDB's new president, Luis Alberto Moreno, said during an October 14-16 summit of Ibero-American heads of state and government in Salamanca, Spain, that his institution will support a variety of programs to create "more and better possibilities for millions of families across the region who receive remittances to get more out of their resources." The programs supporting those who receive remittances, he added, will give "future generations of workers better opportunities in their own countries."

By improving the region's banking and credit systems, Moreno said, the remittances can be leveraged for more efficient use and to "obtain a multiplier effect on development."

The challenge, said Moreno, is to link remittances with the banking systems in Latin America and the Caribbean to provide a better life for immigrants working abroad and their families back home.

The need to make better use of remittances was reiterated by U.S. Treasury Secretary John Snow in March 25 U.S. congressional testimony. Snow said a major problem faced by immigrants in sending remittances home is that often they pay high fees to transfer the funds.

Once the funds arrive at their destinations, said Snow, the limited access of recipients to financial services -- or their lack of knowledge about such services -- often restricts their options for saving or investing the funds in such areas as education expenses or small business enterprises.

"Thus, tremendous potential for remittance flows to contribute to economic growth and development is lost," Snow said.

Because of the growing role that remittances play in the world economy, the Bush administration is working to lower the costs of sending remittances. This effort began in 2001 with the U.S.-Mexico Partnership for Prosperity, which has resulted in a significant reduction in the cost of remittances from the United States to Mexico.

The effort continued at the 2004 Special Summit of the Americas in Monterrey, Mexico, where President Bush and the other leaders of Western Hemisphere nations set a 2008 goal of cutting the cost of sending a remittance by 50 percent. More information on the Summit of the Americas is available on the State Department Web site.

Eric Green
Washington File Staff Writer




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