Immigrants sending much more back home
Remittances to Latin America up 50% to $45 billion
By Dalia Naamani-Goldman, Medill News Service
Last Update: 5:25 PM ET Oct 18, 2006
WASHINGTON (MarketWatch) — Immigrants in the United States will send more than $45 billion to back to Latin America this year, 50 percent more than 2004, according to a report released Wednesday by the Inter-American Development Bank.
The money, which eclipses the amount of foreign investment and development assistance received in the region, is sent by about 13 million immigrants and reaches about 20 million households in Latin America, according to the study.
Lower costs for transferring money and higher wages for the immigrants have contributed to the increase in the remittances, according to the bank.
The study does not distinguish between legal and illegal immigrants.
“The challenge now is to help leverage the economic development impact of remittances,'' the report says. “While remittances are clearly far from reaching their full potential as an investment tool, the recent survey shows the international migrant community is becoming increasingly aware of the potential of structuring the transfer of funds to achieve more effective economic results.''
The study also urges Latin American financial institutions to open their doors to those receiving funds from relatives in the United States. Though most transmitting goes through banks, very little is deposited or invested there. Part of that responsibility goes to the banks, said Peter Bate, spokesman for the development bank.
While banks don't earn much money from processing remittances, they can profit through other services offered to the immigrant customers, Bate said.
“It provides an opportunity for financial institutions to list clients who have steady income and might be clients of other services,'' Bate said. “What banks have learned is people who receive remittances can be very good clients, and the fact that they do have a steady flow of income is as good an indicator as actually having a job at home.''
The study also finds immigrants sending money to Latin America have $500 billion in purchasing power. About 10% of their earnings are sent abroad, the report says. The largest sums come from California ($13 billion) and Texas ($5.3 billion). Louisiana will see a 250 percent increase this year to $208 million, due to an inflow of construction-related workers to help rebuild regions damaged by Hurricane Katrina.
Some critics of current immigration levels don't think the contributions to the U.S. economy are enough to cover the government and social services immigrants get.
“It's not a zero-sum game,'' said John Keeley, a spokesman for the Washington-based Center for Immigration Studies. “They are low-skilled and under-educated, work in low-wage jobs. They are a burden, they do not pay much in taxes…and use more government services.”
The report comes as Congress struggles to come up with a way to control illegal immigration while also addressing employee shortages that concern businesses. There are an estimated 12 million illegal immigrants in the United States.
Sen. Edward Kennedy, D-Mass., who co-sponsored the Senate's bill that passed in May, has focused on stronger borders, creation of a guest worker program and finding a way for illegal immigrants present in the U.S. to earn citizenship.
Kennedy is also interested in finding ways to channel remittances to economic development through matching programs to build a country's infrastructure and communities, according to his spokeswoman Laura Capps.
Kennedy “would like to see more on that issue,'' Capps said.
In an effort to stem the flow of illegal immigrants, Rep. Tom Tancredo, R-Colo., who is among the most vocal critics of current U.S. immigration policy, has proposed legislation to put a 5% tax on remittances. Remittances make up the second largest source of income for Mexico, spokesman Carlos Espinosa said.
“They lose their poorest people and by getting rid of them they also gain the remittances,'' Espinosa said. “This is a win-win situation for Mexico.''
Dalia Naamani-Goldman is a reporter for Medill News Service in Washington.