MercoPress. South Atlantic News Agency

Remittances' double impact in Latinamerica

Remittances from hardworking emigrants in developed countries are rapidly becoming the main source of capital for Latinamerica and the Caribbean, according to a report from the Intern American Development Bank.

Transfers are estimated in over 45 billion US dollars annually, (and growing) which far exceeds multilateral development aid and in some years foreign direct investment that in an exceptional year as 2004 totalled 56,4 billion US dollars.

United States is the main source of remittances, with two-thirds of the total, although large amounts also come from Latin Americans working in Europe and Japan. In some countries such as El Salvador and Honduras remittance flows are accounted in national budget estimates.

In recent years remittances have helped balance public accounts of several countries and reduced poverty rates because most emigrants send money back to their families. However the outlook is not promising according to some political scientists who are analyzing the phenomena.

"The outlook is one of enormous instability" says Professor Rodolfo Garcia from Zapatecas University who has been looking at similar experiences in other parts of the world such as Turkey with its massive influx of emigrants working in Germany.

"It's estimated that in fifteen years remittances to Mexico are going to drop, and if there's no local development or regional development, we are going to face a situation of economic stagnation, of growing economic, social and political tensions, which unfortunately are not been considered", insists professor García.

Turkey received huge amounts of remittances in the 1980s and 1990s peaking in 1998 followed by a sharp decline. The reunification of Turkish families in Germany caused the flow of remittances to dry up, according to a study by Columbia University.

Mexico is the largest recipient of remittances in Latin America, with nearly 17 billion US dollars annually followed by Brazil and Colombia.

Central America and the Dominican Republic receive over ten billion US dollars and the Andean countries, particularly Ecuador (mainly from Spain) seven billion.

But the other great problem is that remittances, strictly defined, are not investment capital since they provide subsistence income for many poor families and not much of that money actually promotes development, businesses or creates jobs.