Oct 20, 2006

Increased Role of Remittances

by Laura Starita

A recent Inter-American Development Bank report shows that in 2006 Latin American immigrants living in the United States sent $45 billion in remittances to their home countries. To put that into context, it’s about 30 percent more than the 2006 United States public and private aid contribution for the entire world. Just as remarkable is the estimate that the average Latin American immigrant sends 10 percent of his or her gross income back home. While this money shouldn’t be considered philanthropy as some call it, it does have a major development impact: remittances are Mexico’s second largest source of foreign currency after oil exports.

We recently noted a study published by the Cato Institute that concludes that remittances have a positive effect on investment, a key ingredient in economic growth. Official aid can’t make that claim. Additionally, the Bank’s study shows that 30 percent of immigrants are making investments in their home countries including real estate and small businesses, up from 5 percent in 2001.

When we look back in 10 years, we may conclude that the most powerful international anti-poverty efforts of the first world were remittances made by immigrants.

InterAmerican Development Bank: Migrant remittances from the United States to Latin America to reach $45 billion in 2006, says IDB