Inter-American Development Bank on Remittances

There is a new study by the Inter-American Development Bank on the flow of remittances:

Survey finds lower percentage of Mexican migrants sending money home from the United States


Sharp drop in states where Latin American immigration is more recent

A significantly lower percentage of Mexican migrants are sending money to their homeland from the United States than last year, according to the results of a survey released today by the Inter-American Development Bank’s Multilateral Investment Fund (MIF).

The percentage of Mexicans who regularly make remittances fell to 64% in the first half of 2007, down from 71% last year. The drop was the steepest in states where Latin American immigration is most recent, like Georgia, North Carolina or Pennsylvania. In “new destination” states the percentage plunged to 56% this year from an average 80% in 2006.

States that have long had large Hispanic communities, such as California, Texas, Florida and New York, have not seen similar falls. In “traditional destination” states the percentage of Mexicans who regularly send money home slipped to 66% from 68% over the same period.

“In the new destination states, around half a million migrants have stopped sending money home,” said MIF Manager Donald F. Terry. “This means that over the past year two million people in Mexico have lost a vital lifeline”.

The drop helps explain why, after years of double-digit growth, remittances to Mexico were essentially flat during the first half of 2007 ($11.5 billion) against the same period of last year ($11.4 billion), according to Mexican central bank data.

The flattening of remittances flows to Mexico contrasts with the continued growth of money transfers to Central American countries. Remittances to El Salvador, Guatemala and Honduras rose by an average 11% during the first half of 2007, compared with the same period last year.

Mexican and Central American migrants have similar demographics in terms of ages, incomes and length of residence in the United States. Most of them work in industries such as construction, hotels, restaurants, food processing and agriculture. A major difference is that almost all Central Americans (97%) live in traditional destination states, while more Mexicans (18%) have spread to new destination states.

Pollster Sergio Bendixen, whose Miami-based company carried out this survey and many other similar polls for the MIF since the year 2000, said Mexican migrants in new destination states cited an unprecedented range of difficulties that made them less optimistic about their prospects.

Most migrants said it is harder to find jobs for good pay now than last year. Among the main obstacles mentioned were the lack of legal immigration documents, formal education and proficiency in English. A vast majority also felt discrimination against Latin Americans has grown.

Bendixen noted that the slowdown in remittances could herald economic dislocations in states from which Mexican migrants have stopped sending money home, although the potential impact is not yet fully understood.

The survey was conducted in June and included 900 interviews among Mexican and Central American immigrants. About half the respondents said they were undocumented. The poll’s margin of error is 3 percentage points.

Terry said the MIF plans to commission another survey early next year to determine whether the current trend persists and spreads to other states or whether it is a temporary deviation from the patterns observed over the past decade.

The MIF, an autonomous fund administered by the IDB, fosters private sector development in Latin America and the Caribbean, with an emphasis on microenterprises and small businesses. It originally started tracking remittances to study their impact in the region’s economies.

The MIF’s work on remittances helped attract more services providers to an industry traditionally dominated by money transfer operators. Over the past few years, competition and technological innovations have driven down the costs of remittances to the region.

Projects backed by the MIF seek to bring families that receive remittances into the formal financial system, where they can have access to products and services such as business loans, savings accounts and insurance. It also promotes innovations such as transnational mortgages.