The volume of migrant workers’ remittances sent back to Latin America and the Caribbean remained depressed in 2010, but should grow in 2011, IDB researchers say.
Signs of recovery in the US economy and labour market are grounds for optimism, Natasha Bajuk, who heads work on remittances at the IDB’s Multilateral Investment Fund (MIF), told Emerging Markets.
“Three quarters of remittances to Latin America and the Caribbean come from the US.
“There are indications that the US economy will grow this year. So remittances should grow too – although they will not return to the levels of 2007-08.”
The MIF estimates that total remittances to the region were $58.9 billion in 2010, just a fraction higher than the $58.8 billion sent in 2009, and much lower than the $69.2 billion record set in 2008.
But dollar devaluation against many Latin currencies, and inflation, meant that the value of the money sent home was 8.7% lower year-on-year, the MIF concluded in a report.
Worst hit by exchange rate effects and inflation were Caribbean countries – where remittances rose in dollar terms by 8.3%, but in local currency adjusted for inflation fell by 10.6% – and Mexico, to which remittances were up fractionally, by 0.12%, but were worth 10.6% less to recipients.
Central America was also hit: Costa Rica suffered a 4.86% drop in dollar remittances that translated to a 16.4% loss in value for recipients.
In dollar terms, there were falls in the level of remittances sent to the Andean countries, by 4.07% in total. While the sharpest decrease, 6.86%, was to Ecuador, only Venezuela registered an increase.
“This is primarily a reflection of what is going on in different countries that receive migrants,” Bajuk said. “Spain has become the number one destination for migrants from Ecuador for the first time in 2010. But the economy and labour market in Spain are in trouble.”
Migrants had returned home in smaller numbers after the 2008 crisis than had been generally believed, Bajuk said. “Migrants risk a great deal to leave home, and there is a cost to returning. In destination countries, they are very flexible labour.”
A recent survey of Mexican migrants to the US found that 50% of them had had no job at all when they left, and those that had had earned on average five times more in the US.
The only significant groups of migrants to return were Brazilian and Peruvian workers who had been in Japan. The numbers registered under a scheme to accept Brazilian and Peruvian migrants of Japanese family origin fell from about 372,000 in 2008 to about 325,000 in 2009.
“The economic performance of Brazil and Peru in recent years represent a disincentive to emigration”, the MIF report pointed out.
The report estimated that the weighted average weekly salaries of Latin American and Caribbean workers in the US, which rose by 3.5% in 2007 and 5.3% in 2008, rose by 2.1% in 2009 and fell by 1% in 2010.