Latin America and the Caribbean

1. Remittances and rural development Latin America and the Caribbean

2. Remittances and rural development in Latin American and the Caribbean • This presentation and the accompanying paper deals with the social and economic impact of migration and remittances in the LAC region. • It analyses, in a gender perspective, the continuous interaction of migrants with their communities of origin and the unique role migrants play as agents of change. • It suggests IFAD should broaden its target group to a transnational level, expanding its partnership with migrants who have direct interest in the well-being of rural communities they left behind.

3. Migration and remittances • Latin America & the Caribbean has become important source of out-migration • In 2000, 14.5 million of the foreign-born population living in U.S. were born in Latin America or the Caribbean • Volume of migration is grossly underestimated – figures don’t account for illegal or temporary migrants • Latinos = 13 % of U.S. population (32.8 million) • Remittances in 2002: USD 100 billion worldwide USD 32 billion to the LAC region

4. Importance of remittances in LAC region • On average a migrant sends USD 200, 8 times a year • Nearly 10% of average yearly income. • Median income of migrants in U.S.(1999): • USD 21 000 Male • USD 17 000 Female • In terms of GDP: El Salvador 15%; Nicaragua 29 %; Haiti 24 %. • Surpassed level of FDI and ODA to region

5. Average annual household remittances and GDP per capita GDP per capita Average remittances received by recipient household Ratio 4000 4.00 3739 3.47 3500 3.50 3000 3.00 3024 2.51 2500 2.50 2360 2296 2277 2.23 2152 2171 2056 2080 2104 2077 2048 2000 2.00 1.60 1750 1592 1500 1478 1.50 1296 1168 1.23 1.10 1000 1.00 0.97 920 0.90 0.81 0.77 500 0.50 466 374 0 0.00 Haiti Mexico Ecuador Jamaica Colombia Honduras Nicaragua Dom.Rep. El Salvador Guatemala Sources: GDP per capita: World Bank, World Development Indicators (Washington, DC, 2003); remittances: National Money Transmitters Association (2003), Inter-American Dialogue (2004: 7). The average annual remittance received by remittance receiving households was obtained by multiplying the monthly average amount sent by all immigrant remittance senders multiplied by eight. The latter is the average number of times immigrants send money to their relatives throughout the year.

6. Profile of remittance senders • Older migrants are less likely to remit • Men are more likely to remit than women. (not the case in the D.R.) • Higher education correlates with a lower likelihood of remitting • The longer the period spent away from the country of origin, the less likely a migrant is to remit • When a migrant has immediate family in the U.S., the likelihood of remitting decreases

7. The emergence of transnational communities • Today’smigrants no longer sever ties with home country • Communities spanning borders: immigrants build social fields that link together country of origin and country of settlement • Business transnational in nature (clients, supplies and investors across borders) • HTAs help migrants retain a sense of community as they adjust to new country

8. Socio-economic effects of remittances • Pros: • important source of foreign exchange • Finance imports • Increases household income and improves standard of living of recipients • Multiplier effect in local economy • Cons: • Reduce incentive to invest • Encourage migration • Growth of inequity (recipients vs. non-recipients) • Used for consumption purposes • Creates dependency

9. Effects of migration at communities level • Migration changes: • traditional make-up of families (prevalence of female headed households; children raised by relatives) • age ratios of communities • gender roles & relations • flow of cultural values, ideas, knowledge, etc.

10. Use of remittances • Household Uses: • Alimentary needs • Healthcare • Education • Home improvement • Investment in micro-enterprises, land • Collective Uses: • Improvement of town’s infrastructure (paving of roads, healthcare services, education, etc.) • Investment in income and employment generating projects

11. Mechanisms for transferring remittances • Money transfer companies, credit-cards, Postal service, banks or credit unions (12 to 15 % fees) • Informally or hand-carried, due to lack of contact with financial institutions • 43% of LAC migrants in U.S. do not have a bank account (<20% of Central Americans and Caribbeans have bank account) • Need to strengthen local financial institutions, rural financial infrastructure increase savings and local development

12. Using the skills & knowledge of migrants • Human capital resources of migrants not sufficiently explored by LAC countries • Latin American & Caribbean efforts: • Jamaican return migrants programme • Mexican “Proyecto Esperanza” • Migrants have systematically expressed interest in sharing skills/knowledge gained abroad with communities of origin

13. Other untapped resources • Tourism: • In many countries significant portion of tourists are visiting migrants (e.g. 40% in Dominican Republic) • Visiting migrants generate large amount of wealth • e.g. Dominican visiting tourists tend to stay  15 days, spend  USD 65 per day • Ethnic Markets: • Migrants demand for traditional, “nostalgic” goods growing • Governments beginning to hold trade, real estate fairs

14. IFAD and remittances in Latin America and the Caribbean • Sensitization efforts among Salvadoran migrant communities in U.S. • Through workshops in Washington D.C., San Salvador, and Los Angeles • Result of these workshops - increased interest, mobilization and empowerment of migrant associations • Pilot co-financing project through PRODAP II in El Salvador • Incorporation of migrants as partners in design an project implementation

15. Possible scenarios for IFAD to maximize effects of remittances • Expand target group/strengthen linkages HTAs – rural communities • Encourage HTAs’ participation in identification, design, co-financing, implementation of projects • Identify effective mechanisms for tapping knowledge, entrepreneurial skills and enthusiasm of migrants • Promote rural tourism and market fairs of “nostalgic” products among immigrant communities • Strengthen local financial institutions to increase their participation in remittance market – expand funding sources and client base • Encourage gender disaggregated studies on migrants and remittances. • Partner with other organizations working on this area (WB, IDB-MIF, WDCCU, Ford Foundation, etc.)

16. Focus of the discussion • Taking into consideration that remittances are private transfers between the migrant and his/her family what can IFAD do to increase the impact of remittances on rural poverty reduction? • How could we tap on the human capital (knowledge acquired by the migrants) as well as the interest they have in helping the families and communities they left behind? • Can the pilot experience of co-investing remittance resources and IFAD project resources in community development projects, presently under implementation in El Salvador, be replicated in other remittance recipient countries? • What can IFAD do to increase migrant's and remittance recipient families' access to rural financial institutions?