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Emigrant Remittances - an Untapped Treasure?

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    Emigrant Remittances - an Untapped Treasure Diego Cevallos By: Inter Press Services MEXICO CITY, Dec 20 (IPS) - The millions of Latin Americans driven out of
    Message 1 of 1 , Dec 24, 2002
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      Emigrant Remittances - an Untapped Treasure
      Diego Cevallos
      By: Inter Press Services

      MEXICO CITY, Dec 20 (IPS) - The millions of Latin Americans driven out of their countries by economic crisis and high unemployment hold a treasure that could provide an enormous boost to development in the region.

      The remittances sent to their countries of origin by immigrants from Latin America and the Caribbean living in the United States have risen fourfold since 1990, to a total of 23 billion dollars in 2001.

      Many governments, which share the responsibility for the diaspora of much of their workforce, are now flirting with the emigrants, calling them ''heroes'' and seeking their economic support for development plans, while multilateral lending institutions and non-governmental organisations are trying to get them to invest more money, and in more effective ways, in the region.

      The Inter-American Development Bank's (IDB) Multilateral Investment Fund estimates that in the first decade of the present century, Latin America and the Caribbean could receive up to 300 billion dollars in funds from Latin Americans living abroad.

      A large part of the 35 million people of Latin American origin living in the United States send money transfers to their families back home on a regular or occasional basis.

      The amount the emigrants send home, while large, is just one- seventh of their total combined income, estimated at 325 billion dollars a year.

      Nearly all of the remittances are quickly spent on basic needs and consumer goods, and very little is invested or put to more long-term uses.

      But while few productive undertakings are financed by the money coming in from abroad, new initiatives have been cropping up.

      In several Latin American countries, the remittances represent more than 10 percent of Gross Domestic Product (GDP).

      Salvadorans, for example, sent two billion dollars to their families in 2001 alone -- nearly 350 million more than the economic losses caused by two earthquakes that hit El Salvador early that year, which represented 13 percent of GDP, according to IDB estimates.

      With their sweat and hard work, often in exploitative conditions, immigrants are earning money that could make a big difference to the development of Latin America and the Caribbean, said José Cervantes, a researcher at the National Autonomous University of Mexico.

      Part of Mexico's most highly qualified workforce is in the United States, and sends home more than seven billion dollars a year -- compared to 2.5 billion in the early 1990s -- which makes the country the second biggest recipient of emigrant remittances in the world, after India, which receives nine billion.

      Some four million Mexicans living in the United States are undocumented workers; over half of the 8.5 million people of Mexican descent in that country are between the ages of 25 and 34; 70 percent of the immigrants work between 50 and 52 hours a week; and most of them have no social benefits or social security coverage, according to Mexico's Secretariat (ministry) of Foreign Relations.

      The IDB and World Bank have their sights set on that flow of capital, and are designing projects to promote the productive investment of the funds, for which they will provide complementary financing.

      A similar route is being followed by a number of United States- based Hispanic non-governmental organisations, which are encouraging immigrants to save up and invest in their countries of origin.

      But a handful of financial companies, like the U.S. Western Union and Money Gram and Mexico's Banco Azteca, are also after the funds, which they transfer from the United States to Mexico for a juicy commission.

      Although emigrants have begun to finance new long-range development initiatives back home, their contribution in that area is still tiny, said Mexican researcher Federico Torres, who has carried out several studies on the question for the IDB and World Bank.

      The potential of emigrant remittances is enormous, and is hardly being tapped, he added.

      There are no official figures yet on the total investment by Latin Americans abroad in productive undertakings in the region, but examples are becoming more numerous.

      In Mexico, emigrant remittances finance programmes like ''Mi Comunidad'' in the central state of Guanajuato, and ''3 x 1'' in the northern state of Zacatecas.

      Thanks to Mi Comunidad, emigrants have invested more than 4.5 million dollars to set up 21 maquiladora companies -- tax-free plants that assemble foreign-made components for re-export -- in Guanajuato in the past four years.

      And through the 3 x 1 programme, more than 400 community projects have been financed over the last eight years, with a total investment of around five million dollars.

      Mexican President Vicente Fox, who has dubbed the country's emigrants ''heroes,'' pledged that for every peso that they invest in productive endeavours in Mexico, the government will put up two.

      According to the IDB, although the remittances currently alleviate poverty in Latin America and the Caribbean, they could do much more than that, and could become a decisive boost to development.

      However, there are still many obstacles standing in the way of emigrants becoming a real engine for development and growth in the countries they have been forced to leave due to the lack of opportunities.

      Emigrants tend to be wary of projects designed by their countries of origin, and they generally lack interest in and knowledge about investment, said Cervantes. Moreover, he added, many want to set up comfortable lives for themselves in the United States, and send only a small portion of their income back to Mexico.

      But governments and international lending institutions are clearly aware of the potential of emigrant remittances, and are seeking ways to harness it.

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