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One Home, Two Nations


REMITTANCES


Definition: Remittances
Remittances (remesas in Spanish) are the money immigrants send to their home country. There are two types of remittances:

Family remittances - This is money sent by individual immigrants to family and friends back home. These remittances are often used to meet their most basic needs. Family remittances dwarf development aid and foreign investment. They're said to be the most single most important factor fighting poverty in the world today.

Community remittances - This is money sent by individual immigrants and by hometown associations to communities in their home country. This money has traditionally been used for infrastructure, like parks, church and roads. Increasingly, it's destined for government coffers. Mexico has a "Tres por uno" program, which matches three tax dollars for every one dollar donated to a regional government. Development experts are trying to steer community remittances toward educational initiatives and job creation.

OVERVIEW: REMITTANCES WORLDWIDE


  • One in 10 people around the globe is directly involved with remittances.
  • The U.S. is the largest source country, with $31 billion of remittance outflows annually.
  • Latin America is the region with the largest and fastest growing remittance flow. It received nearly 40 percent of the $126 billion in remittance sent to developing countries in 2004.
  • Migrants sent $45.8 billion to Latin America in 2004, a 20 percent increase from the year before. That's the third year in a row remittances have exceeded foreign investment and development aid.
  • Were remittances to stop flowing, Latin America's economies would collapse in an estimated three months.
  • This rapid growth in remittances is expected to slow as more Latin American immigrants blend into U.S. society and send less money home.
  • Remittances are largely resistant to the U.S. business cycle. Remittance rates increase every year despite drops in the U.S. economy.
  • Remittances tend to increase when the home country's economy slows. That's because remitters send more money when their families hit hard times. This counter-cyclical nature of remittance make it a particularly effective anti-poverty tool.
  • Remittances promote economic growth, increased investment and community development. They also can result in higher interest rates and inflation.

    REMITTERS: A STATISTICAL SNAPSHOT


    Remitters come disproportionately from the working poor, and many are in the United States illegally. They remit on average 12.6 times a year, typically $150/200/250 each time. These remittances constitute approximately 10% of their household income. A quarter of remitters send money home first, even before paying their own bills.

    47% of all Hispanics born outside the U.S. regularly send money to their country of origin.
    57% of immigrants from El Salvador send remittances
    60% of U.S. remittance senders are male
    63% are under the age of 40; the average age is 37
    59% are married
    59% have not completed high school
    57% make less than $30,000 a year
    64% of those who are employed are unskilled laborers
    45% say they plan to move back to their home country
    55% do not have credit cards
    43% do not have bank accounts

    EL SALVADOR: REMITTANCE NATION


  • 2.5 million Salvadorans, legal and illegal, live in the U.S., more than one third the total in El Salvador itself.
  • El Salvador's principal export is its people, after that, coffee, sugar, rice.
  • El Salvador's principal import are remittances from Salvadorans in the U.S., estimated at $2.5 billion annually, 17.1% of the GDP.
  • Remittances to El Salvador have increased by more than 6 percent a year for more than a decade, with double-digit growth more recently.
  • Remittances to El Salvador represent 133 percent of all exports, 655 percent of foreign direct investment, and 91 percent of the government budget.
  • Remittance flows to El Salvador are so large the country completely dollarized its economy in 2001.
  • 22 percent of households in El Salvador receive remittances, more than any other Latin American country. Three quarters of that money goes to household expenditures.
  • El Salvador has a 13 percent sales tax and no property tax. Since remittances are primarily used for consumption, they amount to the poorest people in the country subsidizing the government.

    SOURCES: Inter-America Development Bank, Pew Hispanic Center, The Central Reserve Bank of El Salvador, USAID, World Bank, Inter American Dialogue, Foreign Affairs en Español

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