Immigrants' Cash

From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Mon Jun 07 2004 - 02:00:25 EDT 6, 2004

Adding Value to Immigrants' Cash

N the highway connecting El Salvador's national airport to the
capital, San Salvador, most of the billboards don't promote luxury
cars, fancy tourist hotels or clothing stores. Instead, they
advertise the electronic transfer of remittances - las remesas - the
money earned by Salvadoran men and women in the United States and
sent back in allotments of maybe $200 or $300 a month.

For hundreds of years, immigrant workers in America have sent modest
amounts to their families in the old country, often by hand - through
a trusted friend or an informal agent. Entire villages in Poland and
Greece survived off such homely remittances in the 1950's.

Next week, for the first time, heads of state of the world's
wealthiest nations plan to discuss remittances, in a belated
acknowledgment of their huge role in providing aid to the poor.

Those small bundles of money add up to one of the biggest transfers
of wealth from rich countries to poor ones. The global remittance
market may be as much as $150 billion annually, triple the
development aid given by the wealthy nations to the poor and, in many
countries, far more than direct foreign investment.

When they meet on Tuesday at Sea Island, Ga., President Bush and the
other leaders from the Group of 8 industrialized nations intend to
discuss ways to reduce the cost of sending the money home, and to
make it more useful for poor nations once it gets there. But the
range of ideas on the table is fairly narrow: reducing the size of
commissions paid to companies that transfer the money, drawing
immigrants to the traditional bank and financial system so more of
the money is saved and made available for loans, and using those
savings for specific small-scale development programs.

Absent is any discussion of the plight of the workers who earn and
send back the money. They often risk their lives to reach a rich
country like the United States, where they may hold down two jobs and
earn less than $20,000 a year, suffer years of separation from their
families and endure an uncertain legal status.

Nor will the leaders examine why poorer societies continually need to
export labor to survive - or what can be done to break the cycle.

Despite these limits, Manuel Orozco, Central America project director
for the Inter-American Dialogue, a research group based in
Washington, says the discussion at the summit meeting is an important
step forward. "It's a backdoor way to begin talking about migration
and these workers, a subject that is very sensitive in rich nations,"
he said. "On balance, it is positive to begin these discussions and
understand the critical importance of remittances."

By their nature, such meetings tend toward a cosmic perspective; the
lives of individual workers are often missing from discussions of
trade and globalization. Government leaders dedicated to dismantling
barriers to the free flow of goods and services often avoid talking
about opening borders to the people who make those goods or perform
those services.

But the discovery over the last five years that remittances are a
huge and essential money source for developing countries like
Albania, El Salvador, Tonga and Lebanon is putting some aspects of
labor on the global trade agenda. Mr. Orozco and the Inter-American
Development Bank put together the first studies showing how
remittances had exploded with globalization and the technological
revolution that allowed money to be wired quickly to ever-more-remote
areas of the developing world.

Now the World Bank and the International Monetary Fund are tracking
the global flow of remittances. Dilip Ratha, a senior economist at
the bank, prepared the charts and studies for the talks this week.
"If we can reduce the cost of sending these remittances, it would
mean an additional $10 billion flowing to the poor in developing
nations," Mr. Ratha said. "If we can get the money moving through
formal channels, that would mean greater savings and more credit for
these people."

Kathleen Newland, director of the Migration Policy Institute, a group
that studies immigration issues, said the discussion should include
recommendations for allowing migrant workers to travel back and forth
legally, so they could take an active role in improving their home
communities. "That would have a bigger impact on development," she

Though remittances cover basic expenses for poor families, like food,
clothing, shelter and some education, poor countries need more
investment and entrepreneurship. With foreign aid at low levels and
foreign investors preferring proven powerhouses like China, many poor
nations increasingly depend on their own workers to go abroad and
send money home.

DEVELOPMENT experts like Dani Rodrik, professor of international
political economy at the Kennedy School of Government at Harvard,
said they would be disappointed if world leaders failed to address
the larger issues of the labor force. "Return migration is crucial in
the long run," he said. "Workers returning home with their
remittances could become a huge new flow for new investments as long
as there were enough incentives to invest."

Though many workers return to their home country when economic
opportunities are offered there, migration for the most part has been
a one-way street. Workers come to the United States or other wealthy
nations and, often, their families eventually follow. Some critics
fear that there will be a permanent class of countries that survive
by providing cheap labor to rich nations.

"With this now-highly mobile labor force going to countries with the
jobs, you could see perpetually underdeveloped societies that will
always need to export their labor to survive," said Joseph Siegle, a
fellow at the Council on Foreign Relations. "I don't think that's the
long-term solution we are looking for."

Copyright 2004 The New York Times Company | Home | Privacy Policy |
Search | Corrections | Help | Back to Top

This archive was generated by hypermail 2.1.5 : Tue Jun 08 2004 - 00:00:01 EDT