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Emerging Markets

Nations ‘must help migrants’ in crisis

Latin American nations must use “creative thinking” to help migrant workers and their families cope with the economic crisis, an official of the IDB’s Multilateral Investment Fund (MIF) said yesterday (27 March 2009).

Latin American nations must use “creative thinking” to help migrant workers and their families cope with the economic crisis, an official of the IDB’s Multilateral Investment Fund (MIF) said yesterday.

Governments could “advise workers where the jobs are, in which sectors and [US] states to try”, Gregory Watson, remittances specialist at the MIF, told Emerging Markets. “And at home, they must prepare to help people who fall below the poverty line.”

Remittance flows are sure to fall this year, researchers believe. Total world volume will fall by 5-8%, from an estimated $305 billion in 2008 – of which more than a fifth was to Latin America – the World Bank said in a revised forecast published this week.

The IDB does not publish forecasts. But it acknowledges that volumes will fall – and dollar exchange rates, US unemployment and families’ coping strategies are the key variables, Watson said.

A fall in the dollar’s value would negatively impact Brazilian workers in the US, for example. In January, dollar remittance flows to Brazil were down 14% year on year, but up 11% in real terms because the dollar rose steeply against the real.

“It’s country specific”, Watson said. “In dollarized economies, recipients of remittances have not benefited from the dollar’s strength, but are also shielded from the effect of falls in its value.” Ecuador, which receives a large proportion of remittances from Spain, has been hit heavily by the euro’s fall.

Unemployment in the US endangers remittance flows. Migrant labour tends to be more flexible than average, though, Watson said: that’s why home country governments, by collating and distributing information about labour markets, could help jobless migrants.

The MIF believes that many migrants who have been laid off in the US are hanging on there, preferring to seek other work or self-employment, or adopting other “coping strategies”, rather than making a difficult and perhaps irreversible return to Latin America.

Rakesh Kochhar, associate director at the Pew Hispanic Centre, was sceptical that mobility will help much in a recession this deep. “Unemployment is rising among foreign-born Hispanics in the US, notwithstanding the flexibility”, he said – and many are exiting the work-force and are not included in official jobless statistics.

The MIF and the Latin American Federation of Banks will jointly publish new research on the way that remittances are spent next month.

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