24 April 2006
U.S. Immigrants Fuel Local Economies in Their Home Countries
Remittances are increasing and are becoming easier to track, experts say
Washington – Money sent home by immigrants in the United States reduces poverty in developing countries and supplements government foreign aid, according to reports.
Approximately 34 million foreign-born people live in the United States; they represent 12 percent of the population – the largest share since the 1920s. According to Manuel Orozco of the research group Inter-American Dialogue, 70 percent of these foreign-born people send money home.
Estimates of the value of such remittances vary, but even the lowest figure for 2004 -- $30 billion, reported by the Bureau of Economic Analysis (BEA) -- is an amount 1.5 times larger than U.S. government foreign aid for 2004. (See related article.)
The Hudson Institute estimates $47 billion in remittances and says its figure is higher because it includes person-to-person transfers in addition to bank and wire transfers. The Inter-American Dialogue puts the amount at $60 billion.
Whatever the total, the trend is not in debate: experts agree that remittances have surged in recent years. BEA reports a more than doubling in the dollar amount of remittances from the United States from 1994 to 2004.
THE PERSONAL STORIES BEHIND REMITTANCES
There are two types of remittances: money sent to family to meet basic needs and collective remittances, which pool immigrants’ money for larger projects in their hometowns.
Working men send the largest share of the money to their families. On a sunny April afternoon at the Culmore shopping center in Falls Church, Virginia, the phenomenon was in evidence. Pickup trucks dropped off day laborers who live nearby, and several men went in and out of a travel agency that wires money. A few of them, though not willing to use their full names, talked about their jobs and budgets.
Jose, a 28-year-old road worker, said he sends $100-$200 to his six brothers in Guatemala when they call and ask. One difficulty, he said, is that when it rains he has no work and not much money left to send.
Rene, 19, who has been in the United States for a year, said he sends $100 per month to his mother in Guatemala from what he earns laying tile for contractors.
Carlos, 33, who has been in the United States for 15 years and has a regular job in an auto body shop, wires $200 a week to Honduras to help with the expenses of his grandmother, sister and niece.
Some migrants in the United States organize “hometown associations,” which collect money for large projects. The groups hold parties at which guests donate toward the purchase of an ambulance or the building of a school.
In the early 1980s in California, five hometown associations of immigrants from Zacateca, Mexico, formed the Zacatecan Federation. By 2000, the group was sending $1 million a year home and had convinced municipal, state and federal governments in Mexico to match its donations.
“If you go to Zacateca, you see poor communities completely converted – you see hospitals, clinics, roads and water wells,” said Efrain Jimenez, vice president of the federation.
The project closest to Jimenez’s heart was an early campaign to raise $1,000 for a hose to bring water from a reservoir to a village. “When poor communities don’t have potable water, you see old ladies going to the river to bring water. In drought season, at three in the morning, they go and wait for the small amount of water they can get from a well,” he said.
The countries receiving the largest shares of remittance dollars sent from the United States are India, Mexico, the Philippines, Guatemala and El Salvador. China, Vietnam, Colombia and Brazil also receive significant amounts.
According to Sumitra Chowdhury, an economic analyst at India’s Embassy in Washington, in 2005 India received $32 billion in remittances from its citizens living all over the world. There is no breakdown for how much of that came from the United States, but “the highest number of Indians abroad are in the USA,” she said.
COMPETITION FROM BANKS FOR REMITTANCES
Jeffrey Passel, a demographer for the Pew Hispanic Center, said “a significant share of the increase [in remittances] is due to better data.” He said more often, money is sent electronically, by national banks, and thus is easier to track.
Worldwide, remittance flows surged in the last decade. The International Monetary Fund’s balance-of-payments data show the value of remittances to the regions of Middle East-North Africa and South Asia at near 4 percent of their gross domestic products (GDP). In both Latin America and East Asia-Pacific regions, there has been at least a doubling of remittances as a share of GDP in the recent decade.
James Ballentine of the American Banking Association said banks are competing for remittance business.
Both Citibank and Bank of America have bought banks in Mexico in the past few years, he said, which helps them participate in the Mexican-American remittances market.
The Federal Reserve, the U.S. central bank, now allows banks to use an automated clearinghouse to transfer money to Mexico and provides marketing material advertising the program, called “Directo a Mexico.”
James Maloney, chairman of Mitchell Bank, a small bank in Milwaukee, Wisconsin, said the system recently has allowed his bank to boost the number of remittances it handles from 30 to 120 per month.
The Federal Reserve says 11 percent of U.S. families do not have checking accounts. Maloney said he hopes immigrants, who typically operate in a cash-only economy but who are now walking in his bank’s door to transfer money, eventually will enter the “financial mainstream.”
Reducing by half the cost of transmitting workers' remittances was among the U.S. initiatives agreed to at the 2004 Special Summit of the Americas. (See related article.)
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
