Japan's visible contributions to Latin American economies come in the form of official development assistance (ODA) and foreign direct investment (FDI). A less obvious source of funds, at least until now, is emigrant remittances, which stand at around $2.7 billion a year and exceed ODA and FDI put together. This is revealed in the IDB's study Remittances to Latin America from Japan, the first one of its kind.
Over the course of nearly a century, the "biggest diaspora from Japan has been to Latin America" Donald Terry, manager of the IDB's Multilateral Investment Fund told Emerging Markets. According to Terry, many of these emigrant Japanese and their descendants, who later returned to Japan, are now a big source of funding for Latin American economies.
The bulk of the money, around $2.2 billion a year, goes to Brazil and most of the remainder, which stands at $365 million, to Peru, says Terry. About $10 million a year goes to Bolivia, Paraguay and Colombia. In addition to sending money home, Latin American immigrants in Japan also save hard to start their own businesses, buy a house or educate their children. These habits of thrift reflect the fact that most of the immigrants are Japanese returnees from Latin America.
That Japanese remittances to Latin America exceed inflows from foreign aid and investment is common to other big countries that have large immigrant populations from Latin America, such as the US. But what is not generally appreciated is the size of the Japanese diaspora in Latin America and the size of the flows of people and money from one side of the Pacific to the other, officials say.
"The impact of globalization on accelerating flows of goods, services and capital across borders is well known. The dimensions of a growing international labour market that is fuelled by the movement of workers is receiving much less attention," the IDB survey notes.
Today, Latin America is home to around 1.5 million Japanese citizens, many of whom left Okinawa after World War II. Around 10 years ago, faced with a rapidly ageing population, Japan began inviting some of these emigrants to return. Some 435,000 of them are now estimated to be living in Japan again, of which about 70% send money back to Latin America, according to Terry.
The returnees from Latin America or members of their families work mainly in the Japanese manufacturing and construction industries.