Perfect Storm Bashes Remittances

Economic downturns in the US and Spain, inflation and a weaker dollar will cause a fall in money transfers from LatAm migrants for the first time this decade, according to the IDB’s MIF unit. Migrants from LatAm and the Caribbean will send some $67.5bn to their homelands in 2008, against $66.5bn in 2007, some 1.7% less year-on-year when adjusted for inflation. Until last year, remittances to the region had grown by double digits every year, says MIF, which says this is the first drop since it started tracking these flows in 2000. The new estimates are based on monthly and quarterly data from nine LatAm central banks in countries that receive about 88.5% of the remittances flowing to the region. Earlier this year the MIF had noted that remittances to Mexico, the leading destination of such transfers in LatAm, were no longer rising, while remittances to Brazil, the second biggest recipient, had dropped in 2007. “More recently, Guatemala and El Salvador have reported declines in remittance flows,” says MIF. Nonetheless, the volume of remittances to the region still outstrips all overseas development aid and FDI.