Migrants sent $301 billion back home in 2006, study finds

WASHINGTON
Migrants sent $301 billion back home in 2006, study finds
Migrants leave a huge worldwide money trail, with India and Mexico
benefiting the most, a study showed.
Posted on Thu, Oct. 18, 2007
BY PABLO BACHELET
pbachelet@MiamiHerald.com

WASHINGTON --
Migrants around the world sent $301 billion to family members back home
last year, with India edging out Mexico as the world's top recipient, a
U.N. agency said Wednesday.

An estimated 150 million migrants, most of them living in rich Western
Europe and North America, regularly send money to their mostly poor
relatives in developing economies, according to the first study of its
kind. About 10 percent of the world's population depends in some way on
such remittances.

Remittances have been growing at a 10 percent annual rate, according to
the report by the International Fund for Agricultural Development
(IFAD), a Rome-based U.N. agency. The total triples what rich nations
donate to developing countries.

The money flow has become ''the world's most effective poverty
alleviation program,'' said Donald Terry, a top official of the Inter
American Development Bank (IDB). And while rich countries also benefit
from the arrival of young workers, ``if you're No. 1 in remittances,
you're not developing jobs in your local economy.''

In effect, remittances have become a huge money trail that follows
people moving in search of jobs and opportunities, the report said.

''Walls are not stopping them [migrants], patrol boats are not stopping
them,'' said Kevin Cleaver, IFAD's assistant president. ``I was
surprised at the magnitude of these numbers.''

IFAD commissioned the IDB, a multilateral lender for Latin America, and
the Inter-American Dialogue, a Washington think tank, to help gather the
numbers. The IDB has been estimating remittances to Latin American and
Caribbean economies since 2000.

Indians received $24.5 billion and Mexicans $24.3 billion, the study
showed. China was third with $21.1 billion, according to the report. The
global total was $301 billion The study also took a stab at estimating
remittances to places where the numbers are difficult to tabulate, like
Cuba, Haiti, Iraq, Myanmar, Afghanistan and Somalia.

FAD and the IDB combined official numbers from countries' central banks
with information from banks, money transfer companies and surveys of
migrants, plus estimates of informal remittances like cash carried by
travelers.

The report estimated that Cubans received $983 million in 2006 -- in
line with Cuban government data over the past several years. Terry said
he was ''fairly confident'' of the number's accuracy. Some Cuba-watchers
have disputed Havana's figures and put remittances at $400 million to
$500 million per year.

Afghanistan received $3.4 billion; Iraq, $3.7 billion.

India, China and Mexico received the most money, but the impact on their
economies was more modest relative to their size, going from 0.8 percent
of GDP for China to 2.9 percent for Mexico.

In contrast, El Salvador got $3.3 billion, accounting for more than 18
percent of its GDP. The $2.3 billion received by Honduras represented
almost a quarter of its GDP. In Latin America, the effect of remittances
was less than 1 percent of GDP for Brazil, Venezuela, Chile and Argentina.

Other countries got smaller sums that represented an even bigger boost
for their economies. Eritrea's $411 million worked out to 38 percent of
its GDP. Guinea Bissau's $148 million contributed 49 percent of its
economic output.

Overall, Asia received $114 billion, followed by Latin America and the
Caribbean with $68 billion. Europe -- excluding the wealthier nations in
Western Europe -- obtained $51 billion, Africa $39 billion and the Near
East $29 billion.

The cost of sending money was lowest in Latin America, at 6 percent to 8
percent per transaction, thanks to competition among banks and money
transfer companies.

In the past several years, the IDB and other development institutions
focused on lowering transfer costs and thus putting more money into the
pockets of recipients.

But as remittances have continued to grow and transfer costs have
dropped somewhat, development specialists have begun looking for ways to
harness this wealth for investment purposes, by allowing banks to use
remittances as collateral for small business loans or for mortgages.

''Generating information about the scale of remittances is the first
step toward lowering their costs and improving our ability to leverage
these flows to achieve a greater development impact,'' Terry said.

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