WASHINGTON—Call it a river of gold.
It’s an apt description for the billions of dollars flowing each year to millions of families in Latin America from relatives working in the United States.
Spurred by millions of Latin American immigrants who came here during the 1990s, the amount of money flooding into Latin America from former compatriots is steadily growing, according to the latest estimates on remittances.
Projections are that remittances this year could top $30 billion, up from $23 billion in 2001, according to the Inter-American Development Bank, which tracks money moving across borders. Almost half goes to Mexico, where it replaced tourism last year as the second-largest source of foreign income; only oil brings more dollars.
An estimated 6 million Latin American immigrants, 42 percent of all foreign-born U.S. Hispanics, regularly send money home. Most are poor and typically cobble together $150 to $250 at a time. Last year, more than 100 million transactions took place between the United States and Latin America.
“People are moving north by the millions and moving money south by the billions,” says Donald Terry, who manages the bank’s Multilateral Investment Fund, which hails remittances as a dynamic economic development tool for Latin America.
The importance of remittance dollars is hardly exaggerated. It now outstrips all foreign aid to Latin America, accounts for more than 10 percent of several countries’ economies and equals half the money invested into the region by foreign companies, according to the IADB.
Some Latin American experts and others, however, are not so convinced the growth of remittances is a win-win situation. They say remittances mask economic failures in Latin America.
“Any country with large numbers of people eager to leave means that those countries are not creating enough jobs,” said Robert Pastor, director of American University’s Center for North American Studies and President Carter’s national security adviser for Latin America.
He likens remittances to “welfare payments” because most families use them for day-to-day economic survival.
In his push to create a nationwide guest-worker program, President Bush is proposing that foreign workers be allowed to set aside some money to take with them when their temporary visas expire.
“In many of (these) countries, a small nest egg is what is necessary to start their own business or buy some land for their family,” Bush said this year.
Most remittance receivers in Latin America do, in fact, use the money to pay routine household expenses, according to an exhaustive joint survey commissioned last year by the IADB and the Pew Hispanic Center.
In El Salvador, 84 percent of those polled said they used the cash for day-to-day expenditures. In Honduras, 77 percent; Guatemala, 68 percent; and in Ecuador, 61 percent.
In Mexico, where nearly one in five people interviewed reported receiving remittances, 78 percent said they rely on the money to pay for rent, food and medicine. Only 2 percent said they launched a business or bought property; 8 percent said they saved the money; 7 percent used the money for their children’s education.”It’s going to be a real challenge to redirect these remittance flows for more productive purposes,” said Roberto Suro, director of the Pew Hispanic Center. “All the evidence suggests that the primary reason most migrants send money is to help family members with immediate economic needs.”
Still, Suro argued, the money spent on daily expenses has a positive impact.
“Migration was once viewed as a ‘safety valve’ for those workers could not find a job in their home countries,” he said. “It’s now not only a safety valve, but it’s also a fuel pump for the economies of Latin America.”