Latin America suffers drop in remittances

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Tuesday, March 17, 2009

Slumping economies in the United States, Spain and Japan are causing reverberations in the countries of Latin America as migrant workers send less money home. The Inter-American Development Bank reported that for the first time since they began tracking remittances in 2000, remittances to Latin America declined in the fourth quarter of 2008, dropping 2% relative to the fourth quarter of 2007. In January, remittances declined further, with Colombia experiencing a 16% drop relative to 2008, Brazil suffering a 14% decline, Mexico 12%, and Guatemala and El Salvador each falling 8%. These numbers come as 2008 saw an average 10% increase in remittances. Nearly US$70 billion was sent back to families in those areas in 2008.

Low-skilled jobs such as construction, manufacturing, and restaurant and hotel work have been especially negatively impacted by the global economic crisis, putting the squeeze on migrant workers who depend on these industries. The fall in remittances could have long term effects in the workers' home countries: In times of scarcity, spending on health care and education -- investments that alleviate poverty -- gives way in favor of the bare necessities of survival.

Remittances are number one source of foreign income for Guatemala. At $4.3 billion in 2008, they account for more than the combined income from exports of coffee, sugar and other goods. According to the Central American Institute of Social and Development Studies, 3.5 million people in Guatemala depend on remittances from 1.35 million Guatemalan citizens living in the United States.

The decline in remittances also has serious consequences for Guyana, which receives 43 percent of its GDP in remittances, the most of any country in Latin America and the Caribbean. Guyanese Finance Minister Ashni Singh has projected a decline of 20.9 per cent in remittances for 2009.