Competition among banks and money transfer companies, the expansion of their networks and the application of new technologies have dramatically cut the cost of remittances to Latin America and the Caribbean in recent years, officials and experts said today at a conference at the Inter-American Development Bank.
The average cost of wiring $300 from the United States to Mexico has dropped from around $28 in 1999 to around $10 at present, Bank of Mexico Deputy Governor Guillermo Güémez García said at the inauguration of an international forum on remittances organized by the IDB's Multilateral Investment Fund.
"Thanks to this drop, another $1 billion stays in the pockets of our people," said Güémez García, who pointed out that six years ago there were only 12 firms competing in Mexico's remittances market, while now there are 39 companies.
Mexican migrants make about 50 million money transfers every year, sending between $320 and $350 at a time, he added. Those remittances totaled $16.6 billion last year, about as much as Mexico received in foreign direct investment.
For many countries in Latin America and the Caribbean, remittances have become a key source of hard currency. To highlight how remittances can give millions of low-income people greater access to financial services and housing, the MIF is holding a three-day conference with participants from governments, banks, money transfer companies, credit unions, mortgage lenders, microfinance institutions and migrant associations.
In his opening remarks, IDB President Enrique V. Iglesias noted that while remittances underscore a failure to generate enough jobs in Latin America and other developing regions, they also have a positive impact in alleviating poverty and boosting savings in countries with large diasporas.
According to Iglesias, there are 20 million foreign-born adults in the United States who make up about 10 percent of this country's workforce. Their economic activity generates about $1 trillion a year, one-tenth of which is sent abroad. The other 90 percent, he added, remains here. "Everybody has something to gain in this equation," said Iglesias. "These immigrants are making a big effort to contribute to this country."
Remittances and the IDB
The IDB's Multilateral Investment Fund started to study remittances five years ago, when they were a relatively obscure financial issue. The original goal was to ascertain the volume of these flows and their economic impact in Latin America and the Caribbean, said MIF Manager Donald F. Terry.
The first surveys found that remittances far exceeded all foreign aid to the region. They also found that immigrants were paying exorbitant fees to send money home, Terry added. However, by drawing attention to the huge volumes of money moving across borders, the MIF began to stoke competition in a market traditionally dominated by a few companies.
The U.S. government is also interested in promoting competition in the remittances market and in involving more immigrants in the formal financial system, said Sen. Paul S. Sarbanes (D-Md.), who delivered a keynote speech at the forum's luncheon
Sarbanes, the ranking member of the U.S. Senate Committee on Banking, Housing and Urban Affairs, has introduced legislation to ensure transparency in remittances transactions and to open credit union membership to more low-income people.
One of the main events of the forum is scheduled to take place at 2 p.m. on Wednesday, June 29 in the IDB's Andres Bello Auditorium (1300 New York Ave, NW, 9th floor). Terry will open the first-ever remittances technology fair, where 30 banks, money transfer companies, government agencies and non-profit organizations will showcase their innovations and the services they are providing to migrants and their families.
The MIF, which has commissioned studies in 14 countries and held 23 conferences in the Americas, Europe and Japan on remittances, is now focused on how to help low-income people reap greater benefits from the money they send home.
Among other projects, the MIF is currently promoting remittances-backed mortgages in Mexico, while in Brazil and Peru it is assisting migrants who plan to establish businesses after working in Japan. In collaboration with leading microfinance networks, the MIF is supporting microfinance institutions interested in entering the remittances market as distributors, particularly in rural areas.