Migration and development: integration to the global economy and policy opportunities for donors

Manuel OrozcoInter-American Dialogue, Washington, DC

Dinamycs of migrant transnacionalism

“heightened competition among and within regions, mediated by such micropatterns as ethnic and family networks, accelerates cross-flows of migrants” James Mittleman

GDP: (X-M) + I + G + C

-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

-Maquila, Tourism, Non-traditional exports-Transportation, Telecommunication, Nostalgic Trade

The national income equation in Latin America: a rent seeking and courtesan state?

Diasporas and Transnationalism

Tourism

Transp Transfer

Trade

Telecomm

5Ts

Spends up to US$1,000Cuba 79Colombia 46Ecuador 7El Salvador 34Guatemala 50Guyana 33Honduras 55Mexico 22Nicaragua 66Dominican Rep. 32

Purchase home country goodsCuba 81Colombia 29Ecuador 95El Salvador 56Guatemala 50Guyana 82Honduras 74Mexico 76Nicaragua 83Dominican Rep. 65

Calls over 30 minutes a weekCuba 40Colombia 10Ecuador 13El Salvador 59Guatemala 64Guyana 8Honduras 29Mexico 56Nicaragua 26Dominican Rep. 44

RemittancesSee next chart

Visits home countryCuba 22Colombia 13Ecuador 38El Salvador 26Guatemala 9Guyana 39Honduras 12Mexico 23Nicaragua 19Dominican Rep. 68

DonationsCuba 5ColombiaEcuador 10El Salvador 3Guatemala 3Guyana 27Honduras 7Mexico 4Nicaragua 4Dominican Republic 3

378

376

350

304

303

295

287

276

269

263

257

256

228

222

199

198

191

162

146

0 50 100 150 200 250 300 350 400

Mexico

Brazil

Costa Rica

Paraguay

Chile

Ecuador

El Salvador

Bolivia

Guatemala

Jamaica

Honduras

Colombia

Venezuela

Panama

Dom. Rep.

Argentina

Peru

Haiti

Nicaragua

Monthly Average Sent by Immigrants from the US (US$)

Source: NMTA

Annual Remittance Transfers to Latin America

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

U.S. Billions

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00Mexico, US Bill ions

Colombia

Dominican Rep.

Ecuador

El Salvador

Guatemala

Honduras

Jamaica

Nicaragua

Cuba

Haiti

Mexico (right axis)

Quarterly flows to selected Latin American countries

Quarterly flows to selected Latin American countries

80

180

280

380

480

580

680

1999-1Q

1999-2Q

1999-3Q

1999-4Q

2000-1Q

2000-2Q

2000-3Q

2000-4Q

2001-1Q

2001-2Q

2001-3Q

2001-4Q

2002-1Q

2002-2Q

2002-3Q

2002-4Q

2003-1Q

2003-2Q

0

500

1000

1500

2000

2500

3000

3500

4000Jamaica

Guatemala

El Salvador

Dominican Republic

Ecuador

Colombia

Mexico (right axis)

Phone calls from the U.S.

Country Calls Minutes US RevenuePayment to

countryRevenue

retained

Cuba 11,183,873 90,380,397 62,610,347 52,157,813 10,452,534

Haiti 15,044,285 94,403,300 48,604,307 38,477,939 10,126,368

Jamaica 46,043,174 289,293,100 166,799,717 113,075,751 53,723,966

El Salvador 35,539,167 298,097,546 180,177,525 70,982,303 109,195,222

Guatemala 31,497,001 233,090,127 146,081,061 68,387,420 77,693,641

Honduras 26,036,557 192,741,833 143,055,592 79,273,468 63,782,124

Mexico 765,800,375 5,509,242,499 2,858,624,287 1,088,742,203 1,769,882,084

Nicaragua 13,915,051 89,085,915 59,579,378 27,419,630 32,159,748

Ecuador 51,776,946 303,335,545 $130,928,057 $75,383,274 $55,544,783

Fuente: "2000 International Telecommunications Data," December 2001, Federal Communications Commission

Flights from the United States

Fuente: "International Aviation Development Series," U.S. Department of Transportation

Pais Flights Seats

Daily flights Revenue

Dominican Republic 1441 226586 48 $147,280,900.00

Haiti 317 55858 11 $ 36,307,700.00

Jamaica 966 165289 32 $107,437,850.00

Cuba 104 7500 3 $ 4,875,000.00

El Salvador 551 75605 18 $ 49,143,250.00

Guatemala 465 60940 16 $ 39,611,000.00

Nicaragua 235 33137 8 $ 21,539,050.00

Honduras 410 56367 14 $ 36,638,550.00

The New Economies of Latin America: Betting on the Diaspora

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

$0.00

$200,000,000.00

$400,000,000.00

$600,000,000.00

$800,000,000.00

$1,000,000,000.00

$1,200,000,000.00

$1,400,000,000.00

$1,600,000,000.00

0%

20%

40%

60%

80%

100%

Remittances (Y1) Coffee Exports (Y1)

Trad. Exports (Y2)

Guatemala: Trade and Remittances

Agriculture and Remittances

1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0%

5%

10%

15%

20%

25%

Rem/GNP Agr/GNP

Dominican Republic: Agriculture and Remittances

1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0%

5%

10%

15%

20%

25%

30%

35%

40%

ELSAGR ELSREM

El Salvador: Agriculture and Remittances

The reality of transnational families

Is poverty out of the picture with transnational migration?

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%)

Personal Income and Years living in U.S.

0

5

10

15

20

25

30

35

Less than sixyears

Seven totwelve

Over twelveyears

Hasta 10,000

Entre 10,001 y 15,000

Entre 15,001 y 20,000

Entre 20,001 y 25,000

Entre 25,001 y 30,000

Entre 30,001 y 35,000

Más de 35,000

Immigrants and bank accounts

0

10

20

30

40

50

60

70

80

Bank Account (%) No Bank Account (%)

Colombia Cuba

Ecuador El Salvador

Guatemala Guyana

Honduras Mexico

Nicaragua Dominican Republic

Total

Annual Per capita Remittances and GDP

374466

920

1478

1750

20802171

2277

3739

2077

4100

3279

12961168

2056

2360

21522296

2104 2048

3024

1592

2800

1556

3.465240642

2.506437768

2.234782609

1.596752368

1.229714286

1.103846154

0.9691386460.899429073

0.808772399 0.766490130.682926829

0.47

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Haiti Nicaragua Honduras Ecuador Guatemala El Salvador Jamaica Colombia Mexico DominicanRepublic

Costa Rica Panama

0

0.5

1

1.5

2

2.5

3

3.5

4

GDP per capita

Remittances per capita

Ratio

Viviendas que reciben remesas en zonas rurales y urbanas; y el ahorro del hogar

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

México ElSalvador

Nicaragua R.D.

Urbana

Rural

0

2

4

6

8

10

12

14

16

Mexico El Salvador Nicaragua R.D.

Ahorros

Dominican Republic remittance receiving households: Income and years receiving remittances

0

5

10

15

20

25

30

35

40

Less than sixyears

Seven to twelve Over twelve years

Less than 67

67 to 133

134 to 200

201 to 266

Over 266

Percent cost of sending remittance

16.67%

13.54%9.73%

9.57%

9.02%

8.74%

8.06%

7.07%

6.21%

5.76%

5.56%4.99%

4.39%

4.07%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00%

Cuba

Venezuela

Nicaragua

Haiti

Bolivia

Dom. Rep.

Jamaica

Peru

Colombia

Guatemala

Honduras

Mexico

El Salvador

Ecuador

Remittances as Institutions of Development

Opportunities for development

i. Reduce Costs

ii. Savings, Credit and Banking

iii. Link with hometown associations

iv. Promote nostalgic markets and tourism

v. Create institutional ties with the diaspora

vi. Link remittances and technology

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

Strategy II: Savings, Credit and Remittances

a. Monitoring transfers, especially the exchange rateb. Motivate savings and credit institutions to attract

remittance senders and recipients c. Bring low cost banking centers where there is a

high concentration of families who receive remittances

d. Offer incentives to households that receive remittances;

e. Allow micro-finance and credit unions to become agents of remittances and savings institutions

“The demand for financial services by remittance receiving households rests on the intersection between the role of microfinance institutions, such as credit unions, and rural sector development.”

$1.2$4.1

$9.6$13.5

$17.1

$24.0

$41.2

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03

Volume of Remittances Distributed by 62 Central American CUs in US$ Millions

Mexico: Remittances to rural households

$106,862$442,704

$1,053,786$1,923,668

$3,256,231

$15,027,550

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

Menos de 999 1,000 a 2999 3,000 a 4999 5,000 a 9,999 10,000 a 14,999 Mas de 15,000

15% recibe US$250 al mes, siete veces al año.

Strategy IIb: Remittances and Technology

Wireless internet accessibility, Wi-Fi (Wireless Fidelity) offers the opportunity to integrate the rural sector using computer equipment at a low cost

Computers with Wi-Fi send and receive information using radio waves

This system could be used to send remittances This technology could be administered by local micro-finance

institutions This system also could offer advantages to local businesses

as to generate investment (such as a discount of half or a third of the actual price of a phone call) and simultaneously an opportunity for new markets

Strategy III: Alliances with Home Town Associations

Seek communication and dialogue with HTAs; Social development

Donor technical assistance for project identification; Support of a transnational community radio; Donor support on governance and democratic participation; Donor partnerships in social (health and education) and

infrastructural projects Economic development

Government incentives to attract private sector involvement; Government support in investment feasibility analysis;

Financial infrastructure Support education on financial services; Support to link technology to education, communication and

remittances in the rural areas.

Strategy IV: Expansion of Financial Investment

0102030405060

708090

Mexico El Salvador Dominican Rep. Ecuador

Adquisición de productos nostálgicos

Rum

Cigars

Tamales

Bread

Tea

Cheese

Strategy IVa: Promotion of the nostalgic market

a. Risk and investment analysisb. Build partnerships between the private

sector and the immigrant community;c. Financing small investment projects within

rural sectorsd. Involve home town associations and NGOs

with strategies to invest

Strategy IVb: Tourism and Migration

Establish travel packages to traditional places

Establish new and innovative products for tourists

Create new investment strategies to promote tourism

Strategy V: Connecting the external community with assistance

a. Adopt linking with the diaspora as part of the country’s foreign policy. Use the consulates as points of contact.

b. Forge mutual confidence: a. Support their activities carried out as an organized groupb. Establish ties through meetings and conferences;c. Help in the creation of a diaspora agenda;d. Carry out services demanded by the community;e. Implement summer camps programs

c. Create an office of attention to nationals linving abroada. Unit of community contactb. Unit linking the state and the communityc. Unit of study and analysis

Promoting development through remittances and migration

Articulando el vínculo entre el desarrollo y la migración

Visión regional e integral

Actividades financieras de los inmigrantes en país de origen

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Mexico Guatemala El Salvador DominicanRep.

Ecuador Guyana

Cuenta de ahorro

Préstamo inmobiliario

Pequeño negocio familiar o comercial

Préstamo para mantener el negocio

Ayuda a familia a cumplir con obligaciones económicas además del envío de remesas (préstamos inmobiliarios)

47%

27.00%

15.00% 14.00%

5.00%

0%

5%

10%15%

20%

25%

30%

35%

40%45%

50%

Guyana Ecuador Mexico DominicanRep.

El Salvador

Rango de Actividades y Vínculos que se pueden establecer entre el Gobierno y su Diáspora

• Actividad •Vínculos

•Facilitador •Socio •Ejecutador

•Familiares •métodos económicos de contacto

•impulsar programas de becas de estudio

•Comunitarios •contacto con gobiernos locales

•proyectos de contrapartida

•Realizar tipo 2X1

•Con Sociedad Civil •Comunicación con organismos sociales

•proyectos de apoyo social

•Con el Estado •culturales, económicos, grupo de interés Nicaragüense

•legalización, •doble nacionalidad, voto en el exterior,

Macro-economic issues of remittances

Effects on import capacity and foreign currency controls

Multiplying effects

Projections

Dominican Republic: exchange rate, remittances and interest (lending) rate

90

110

130

150

170

190

210

Jan-00 Mar-00 May-00 Jul-00 Sep-00 Nov-00 1-Jan 1-Mar 1-May 1-Jul 1-Sep 1-Nov 2-Jan 2-Mar 2-May Jul. 2002 Sept.2002

Nov.2002

20

21

22

23

24

25

26

27

28

29

30

FX

Remit Indx

Int. Lending Rate

Exchange

Jamaica: exchange rate, remittances and interest (lending) rate

90

110

130

150

170

190

210

230

250

Jan-99

Mar-99

May-99

Jul-9

9

Sep-99

Nov

-99

Jan-00

Mar-00

May-00

Jul-0

0

Sep-00

Nov

-001-J

an1-M

ar

1-May

1-Jul

1-Sep

1-Nov

2-Jan

2-Mar

2-May

Jul. 2

002

Sept. 2

002

Nov

. 200

215

17

19

21

23

25

27

29

FX

Rgrwth

Lending IR (right axis)

Guatemala: exchange rate, remittances and interest (lending) rate

0

100

200

300

400

500

600

Jan-99

Mar-

99

May-99

Jul-9

9

Sep-99

Nov-99

Jan-00

Mar-

00

May-00

Jul-0

0

Sep-00

Nov-00

1-Jan

1-Mar

1-May

1-Jul

1-Sep

1-Nov

2-Jan

2-Mar

2-May

Jul. 2

002

Sept. 200

2

Nov. 2

002

15

16

17

18

19

20

21

22

FX

Remittance Index

Interest Lending Rate (right axis)

Ecuador: exchange rate, remittances and interest (lending) rate

90

100

110

120

130

140

150

160

170

180

Jan-99

Mar-

99

May-99

Jul-9

9

Sep-99

Nov-99

Jan-00

Mar-

00

May-00

Jul-0

0

Sep-00

Nov-00

1-Jan

1-Mar

1-May

1-Jul

1-Sep

1-Nov

2-Jan

2-Mar

2-May

Aug.

2002

Oct.2002

Dec. 2

002

12

12.5

13

13.5

14

14.5

15

15.5

16

16.5

FX

Remit Indx

ILR

Mexico: exchange rate, remittances and interest (lending) rate

100

120

140

160

180

200

220

240

Jan-99

Mar-99

May-99

Jul-9

9

Sep-99

Nov

-99

Jan-00

Mar-00

May-00

Jul-0

0

Sep-00

Nov

-001-J

an1-M

ar

1-May

1-Jul

1-Sep

1-Nov

2-Jan

2-Mar

2-May

Jul. 2

002

Sept. 2

002

Nov

. 200

2

5

10

15

20

25

30

35

40

45

FX

Remitt Index

ILR

Remittances Received in Mexico and Central America, Projected 2002-2030

$0

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

$30,000,000,000

$35,000,000,0001980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Historic RemittancesConstant 1997-20015-Year Grow th of 1995-20015-Year Grow th of 1999-2001