Remesas and Divisas

views updated

Remesas and Divisas

Remesa (remittance) is the term used to describe the money that migrants set aside from their wages to send back to friends or family in their home communities. Often from Latin America, remesas are sent in the divisa (currency) of U.S. dollars. Studies conclude that remittances sent to Latin America, specifically Mexico, Central America, and the Caribbean, constitute a significant contribution to those countries' national incomes (see Table 1). In fact, in 2004 an estimated $45 billion was sent in remittances to Latin America and the Caribbean, exceeding the amount of all foreign aid to the region. However, remittances are not unique to Latin American migrants: In 2004 workers all over the world sent more than $175 billion in remittances to their home countries.

Remittances as percentage of GDP, 2000
Source: World Bank, The 2000 World Development Indicators, CD-ROM (Washington, D.C.: World Bank, 2002).
Dominican Republic2.5515
El Salvador1617
Table 1

Since 1970, migration out of Latin America and the Caribbean has increased significantly, and that increase in migration has produced greater amounts of money remitted back to Latin America. Consequently, remittances have become one of the most significant links between migrants and their home countries. The majority of remittances are sent through money-transfer companies, which typically charge a transaction fee of 10 percent. Less commonly, remittances are transmitted via couriers or travelers, as well as through banks and the mail. Overwhelmingly, remittances are utilized by receivers for daily expenses such as food, clothing, and medicine. Remittances can also assist in increasing quality of life, making investments, establishing savings, and attaining educational pursuits.

Typically, those sending remittances are family members, most often the siblings or children of family members back in the home country. The majority of those sending remittances to Latin America from the United States are undocumented workers or legal residents of the United States whose annual incomes were less than $20,000 in 2004. Scholars have noted the number of Hometown Associations (social organizations of migrants from the same local towns) that collectively send money to their hometowns in Latin America. With increased migration, the number and size of such groups continues to grow.

Increased migration has become an essential factor of the global economy, and family remittances have contributed to bringing Latin America into this context. The money brought into Latin America through family remittances plays a significant role in the national economies of many Latin American countries. In Nicaragua remittances constitute a quarter of the country's income. In El Salvador remittances have at times exceeded the amount made through exports. Overall, they are becoming a more significant percentage of the overall gross domestic product of many Latin American countries (Table 1).

There is some debate about the positive and negative impacts of remittances on Latin America. On the one hand, they are seen as improving the standards of living and quality of life of many families, as well as stimulating development and the economies of Latin America. On the other hand, case studies allude to the fact that they do little to solve the economic problems of Latin America because they fail to halt migration, which depletes Latin America of its working-aged population and decreases the likelihood of investment by foreign investors or national governments. Some critics point to the unpredictable nature of remittances, which create dependency in recipients and, conversely, for nonrecipients, leads to income inequality.

See alsoEconomic Development; Migration and Migrations.


De la Garza, Rodolfo O., and Briant Lindsay Lowell, eds. Sending Money Home: Hispanic Remittances and Community Development. New York: Rowman and Littlefield, 2002.

Despipio, Louis. Sending Money Home … For Now: Remittances and Immgirant Adaptation in the United States. Los Angeles: Tomás Rivera Policy Institute, 2000.

Lowell, Briant L., and Rodolfo de la Garza. The Developmental Role of Remittances in Latino Communities and in Latin American Countries. Los Angeles: Tomás Rivera Policy Institute, 2000.

Orozco, Manuel. "Globalization and Migration: The Impact of Family Remittances in Latin America." Latin American Politics and Society 14, no. 2 (Summer 2002): 41-66.

Terry, Donald F., and Steven R. Wilson, eds. Beyond Small Change: Making Migrant Remittances Count. Washington, DC: Inter-American Development Bank, 2005.

Waller Meyers, Deborah. "Migrant Remittances to Latin America." In Sending Money Home: Hispanic Remittances and Community Development, edited by Rodolfo O. de la Garza and Briant Lindsay Lowell. New York: Rowman and Littlefield, 2002.

                                     Andrea Vicente