By Steve Thomas Observer Nevis Editor
(Washington, D.C.) ” A leading bank is saying that less money will be flowing this year to families in the Caribbean and Latin America from overseas workers. These funds, known as remittances, are key to the finances of many families. According to the Inter-American Development Bank, “The volume of remittances to Latin America and the Caribbean still outstrips all the overseas development aid and foreign direct investment in this region. Remittances are and will continue to be a vital lifeline for millions of households. Previous studies have highlighted how, throughout this decade, remittances have been more stable than other currency flows.” The IDB’s top official says overseas workers will make adjustments to keep the money flowing. “People who are already abroad will adapt, looking for new jobs or cutting back on consumption in order to keep sending money home,” said IDB President Luis Alberto Moreno “Those thinking of migrating will probably opt for destinations where the economy is stronger and more jobs are available. Industrialized nations will continue to attract migrants but we expect to see an increase in remittances between developing countries, as more people move to places less affected by the global downturn.” Although the amount of the monies sent is expected to rise, the value of remittances will go down. This is being caused by inflation, a weaker dollar and economic slowdowns in the U.S. and Spain. According to the bank, “an analysis of recent remittance data by the Inter-American Development Bank’s Multilateral Investment Fund (MIF), migrants from Latin America and the Caribbean will send some $67.5 billion to their homelands in 2008, against $66.5 billion in 2007. “However, adjusted for inflation, this year’s total will be worth 1.7% less than the total sent in 2007, marking the first decrease in the value of remittances to Latin America and the Caribbean since the MIF started tracking these flows in the year 2000. Until last year, remittances to the region had grown by double digits every year. Earlier this year, the MIF noted that remittances to Mexico, the leading destination of such transfers in Latin America, were no longer rising. Meanwhile, remittances to Brazil, the second biggest recipient, had dropped in 2007. More recently, Guatemala and El Salvador have reported declines in remittance flows. Other factors in the downturn are higher inflation, principally driven by increasing food and fuel prices; a weaker dollar, particularly in countries where the local currency has appreciated against the U.S. currency; more restrictive measures against illegal immigration and improving economic opportunities in migrants” homelands, especially in the case of Brazilians. The IDB offers its suggestion to help in at least one aspect of the situation: “From a development standpoint, the IDB sees a more urgent need to bank the millions of unbanked families that receive remittances in Latin America and the Caribbean. By gaining access to the formal financial system, these families would be able to use the kinds of services that allow better-off households to accumulate savings and weather economic hardship.”
