Latin America: despite the crisis, remittance flows are still robust

Remittances, a lifeline for many Latin American economies, are also crucial for the millions of households receiving monthly support from family members abroad.

The U.S. economic recovery and strengthened labor market bolstered remittances to Latin America, although the uncertain performance of Eurozone economies has tempered remittance flows, which are not expected to reach previous levels.

A new report predicts that in 2012, remittances to Latin America will grow a modest 2.9%, for a total of US$ 64 billion.

According to the report, the economic recovery is expected to produce a progressive growth in remittances to Latin America. For example, remittances are expected to reach US$ 68 billion in 2013, an estimated US$ 75 billion in 2014 and US$ 84 billion in 2015. Mexico, however, is a different story. Remittances here remained unchanged between July and September (0% growth), which seems contradictory given the improvement in the U.S. labor market. Experts attribute this to reduced migration flow from Mexico.

Worldwide figures showed stronger results. Official statistics estimate that remittance flows will reach US$ 406 million in 2012, a 6.5% increase over last year. Remittances are expected grow 8% in 2013 and 10% in 2014, according to the report.

 “Migrant workers are displaying tremendous resilience in the face of the continuing economic crisis in advanced countries,” said Dilip Ratha, Manager of the Bank’s Migration and Remittances Unit and author of the report. “Their agility in finding alternate employment and cutting down on personal expenses has prevented large scale return to their home countries.”

In this context, there is a need to reduce the costs associated with sending remittances – from an average of 9% of the money sent— to strengthen the impact of the funds sent to developing countries.

To this end, the Central American and the Caribbean region has implemented a pioneering initiative. A new online platform created by the World Bank and other organizations offers the possibility of comparing prices and choosing the best option for both the sender and the recipient of the remittances. In 2010 alone, Central Americans and Dominicans living in the United States sent US$ 14.9 billion to their countries, at a cost of US$ 700 million. These remittances have a major impact on the economies and are a vital lifeline for thousands of households.

How does the crisis affect remittances?

Since the crises of 2008 and 2009, immigrants to the U.S. have re-found work, especially those with technical skills. However, fragile labor markets in European countries that traditionally had high remittance levels– Spain, Italy and the United Kingdom – have reduced outflows.

Despite the projected growth in remittances in the coming years, the economic crisis is slowing remittance flows, especially in Europe, Central Asia and Sub-Saharan Africa.

The top recipients of remittances for 2012 include India ($70 billion), Mexico ($24 billion[K1] ) and Nigeria ($21 billion). Other large recipients include Egypt, Pakistan, Bangladesh, Vietnam, and Lebanon.