Latin America and the Caribbean

1
Remittances and
rural development
Latin America and the Caribbean
2
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.

3
Migration and remittances

• 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 dont 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

4
Importance of remittances in LAC region

• 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 Male
• USD 17 000 Female
• In terms of GDP El Salvador 15 Nicaragua 29
  Haiti 24 .
• Surpassed level of FDI and ODA to region

5
Average annual household remittances and GDP per
capita

GDP per capita
Average remittances received by recipient
household
Ratio
4000
4.00
3739
3.47
3500
3.50
3000
3.00
3024
2.51
2500
2.50
2360
2296
2277
2.23
2152
2171
2056
2080
2077
2104
2048
2000
2.00
1750
1.60
1592
1478
1500
1.50
1296
1168
1.23
1.10
1000
1.00
0.97
920
0.90
0.81
0.77
466
500
0.50
374
0
0.00
Haiti
Mexico
Ecuador
Jamaica
Honduras
Colombia
Nicaragua
Dom.Rep.
El Salvador
Guatemala
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.
6
Profile of remittance senders

• 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

7
The emergence of transnational communities

• Todays 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

8
Socio-economic effects of remittances

• 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

9
Effects of migration at communities level

• 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.

10
Use of remittances

• Household Uses
• Alimentary needs
• Healthcare
• Education
• Home improvement
• Investment in micro-enterprises, land
• Collective Uses
• Improvement of towns infrastructure (paving of
  roads, healthcare services, education, etc.)
• Investment in income and employment generating
  projects

11
Mechanisms for transferring 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 (lt20 of Central Americans and Caribbeans
  have bank account)
• Need to strengthen local financial institutions,
  rural financial infrastructure ? increase
  savings and local development

12
Using the skills knowledge of migrants

• 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

13
Other untapped resources

• 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

14
IFAD and remittances in Latin America and the
Caribbean

• 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

15
Possible scenarios for IFAD to maximize effects
of remittances

• 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.)

16
Focus of the discussion

• 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?