Latin America and the Caribbean

Remittances andrural development

Remittances and rural development in Latin American and the Caribbean

This presentation and the accompanying paper deals with the social and economic impact of migration and remittances in the LAC region.

It analyses, in a gender perspective, the continuous interaction of migrants with their communities of origin and the unique role migrants play as agents of change.

It suggests IFAD should broaden its target group to a transnational level, expanding its partnership with migrants who have direct interest in the well-being of rural communities they left behind.

• Latin America & the Caribbean has become important source of out-migration

• In 2000, 14.5 million of the foreign-born population living in U.S. were born in Latin America or the Caribbean

• Volume of migration is grossly underestimated – figures don’t account for illegal or temporary migrants

• Latinos = 13 % of U.S. population (32.8 million)

• Remittances in 2002:

USD 100 billion worldwide

USD 32 billion to the LAC region

Migration and remittances

• On average a migrant sends USD 200, 8 times a year

• Nearly 10% of average yearly income.

• Median income of migrants in U.S.(1999):

USD 21 000 MaleUSD 17 000 Female

• In terms of GDP: El Salvador 15%; Nicaragua 29 %; Haiti 24 %.

• Surpassed level of FDI and ODA to region

Importance of remittances in LAC region

Average annual household remittances and GDP per capita

12961168

2360 2296 2277

3739

1750

920

466374

1478

2080 2171 2077

3024

2056 21522048

1592

2104

2.51

2.23

1.60

3.47

0.770.810.900.97

1.101.23

0

500

1000

1500

2000

2500

3000

3500

4000

Haiti

Nicar

agua

Hondu

ras

Ecua

dor

Guate

mala

El S

alva

dor

Jam

aica

Colom

bia

Mex

ico

Dom.R

ep.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

GDP per capita Average remittances received by recipient household Ratio

Sources: GDP per capita: World Bank, World Development Indicators (Washington, DC, 2003); remittances: National Money Transmitters Association (2003), Inter-American Dialogue (2004: 7). The average annual remittance received by remittance receiving households was obtained by multiplying the monthly average amount sent by all immigrant remittance senders multiplied by eight. The latter is the average number of times immigrants send money to their relatives throughout the year.

• Older migrants are less likely to remit

• Men are more likely to remit than women. (not the case in the D.R.)

• Higher education correlates with a lower likelihood of remitting

• The longer the period spent away from the country of origin, the less likely a migrant is to remit

• When a migrant has immediate family in the U.S., the likelihood of remitting decreases

Profile of remittance senders

• Today’s migrants no longer sever ties with home country

– Communities spanning borders: immigrants build social fields that link together country of origin and country of settlement

– Business transnational in nature (clients, supplies and investors across borders)

– HTAs help migrants retain a sense of community as they adjust to new country

The emergence of transnational communities

• Pros:– important source of foreign exchange– Finance imports– Increases household income and improves

standard of living of recipients– Multiplier effect in local economy

• Cons:– Reduce incentive to invest– Encourage migration– Growth of inequity (recipients vs. non-recipients)– Used for consumption purposes– Creates dependency

Socio-economic effects of remittances

• Migration changes:

– traditional make-up of families (prevalence of female headed households; children raised by relatives)

– age ratios of communities

– gender roles & relations

– flow of cultural values, ideas, knowledge, etc.

Effects of migration at communities level

Household Uses:• Alimentary needs• Healthcare • Education• Home improvement • Investment in micro-enterprises, land

Collective Uses:• Improvement of town’s infrastructure (paving

of roads, healthcare services, education, etc.)• Investment in income and employment generating

projects

Use of remittances

• Money transfer companies, credit-cards, Postal service, banks or credit unions (12 to 15 % fees)

• Informally or hand-carried, due to lack of contact with financial institutions

• 43% of LAC migrants in U.S. do not have a bank account (<20% of Central Americans and Caribbeans have bank account)

• Need to strengthen local financial institutions, rural financial infrastructure increase savings and local development

Mechanisms for transferring remittances

• Human capital resources of migrants not sufficiently explored by LAC countries

• Latin American & Caribbean efforts:– Jamaican return migrants programme– Mexican “Proyecto Esperanza”

• Migrants have systematically expressed interest in sharing skills/knowledge gained abroad with communities of origin

Using the skills & knowledge of migrants

• Tourism:– In many countries significant portion of tourists are

visiting migrants (e.g. 40% in Dominican Republic)– Visiting migrants generate large amount of wealth

– e.g. Dominican visiting tourists tend to stay 15 days, spend USD 65 per day

• Ethnic Markets:– Migrants demand for traditional, “nostalgic”

goods growing– Governments beginning to hold trade,

real estate fairs

Other untapped resources

• Sensitization efforts among Salvadoran migrant communities in U.S.– Through workshops in Washington D.C.,

San Salvador, and Los Angeles – Result of these workshops - increased interest,

mobilization and empowerment of migrant associations

• Pilot co-financing project through PRODAP II in El Salvador

• Incorporation of migrants as partners in design an project implementation

IFAD and remittances in Latin America and the Caribbean

• Expand target group/strengthen linkages HTAs – rural communities

• Encourage HTAs’ participation in identification, design, co-financing, implementation of projects

• Identify effective mechanisms for tapping knowledge, entrepreneurial skills and enthusiasm of migrants

• Promote rural tourism and market fairs of “nostalgic” products among immigrant communities

• Strengthen local financial institutions to increase their participation in remittance market – expand funding sources and client base

• Encourage gender disaggregated studies on migrants and remittances.

• Partner with other organizations working on this area (WB, IDB-MIF, WDCCU, Ford Foundation, etc.)

Possible scenarios for IFAD to maximize effects of remittances

• Taking into consideration that remittances are private transfers between the migrant and his/her family what can IFAD do to increase the impact of remittances on rural poverty reduction?

• How could we tap on the human capital (knowledge acquired by the migrants) as well as the interest they have in helping the families and communities they left behind?

• Can the pilot experience of co-investing remittance resources and IFAD project resources in community development projects, presently under implementation in El Salvador, be replicated in other remittance recipient countries?

• What can IFAD do to increase migrant's and remittance recipient families' access to rural financial institutions?

Focus of the discussion