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Breadwinners Who Know No Borders

Entire economies now depend on remittances.

November 10, 2003|Roberto Suro

Every month, Mexican immigrants living in the U.S. send more than $1 billion to their families back home. That money is mostly scraped together from the earnings of low-wage workers and is dispatched a few hundred dollars at a time to relatives.

These remittances are the expression of profound emotional bonds between those separated by a border. They also represent a new kind of integration among nations undertaken not by trade negotiators or bankers but by ordinary folk who ignore and even circumvent governments and financial institutions to assuage their economic woes.

Money sent home from the U.S. to Latin America and the Caribbean totaled about $25 billion last year and should top $30 billion this year. Remittances to Mexico exceed the value of tourism or agriculture as a source of foreign funds, and in El Salvador remittances account for more than 15% of the gross domestic product, according to the Inter-American Development Bank, or IADB. Migration to the U.S. is often described as a safety valve for such countries because it provides an escape for people who cannot find economic opportunity at home.

With remittance flows at these levels, migration is clearly also providing essential income to those who remain behind. If remittances were suddenly cut off, already fragile domestic economies would be imperiled by the drop in internal consumption. There is now a two-way channel -- people flowing north, money going south -- that has become central to the social stability of many countries in our hemisphere.

To better understand remittance transfers and their consequences, the Pew Hispanic Center and the IADB conducted a series of surveys and other studies in the U.S. and Latin America, drawing information from about 10,000 individuals thus far.

In Mexico, this research found, fully one-fifth of the adults are receiving remittances from relatives in the U.S., and in El Salvador it is nearly a third.

The surveys also show that these funds are reaching every sector of society, not just the poor, and indeed the greatest effect may be in keeping working-class families from slipping into poverty. Though most of the money goes for food and rent, between a quarter and a third of remittance recipients report putting some of it into savings, educational expenses or small investments. Given the size of the flow, these funds far exceed the economic aid and development assistance that wealthy countries like the U.S. are putting into the region.

That is not anything to celebrate. People should not feel obliged to migrate, and those left behind should not be dependent on remittances. Corrupt and inefficient government, populations growing faster than economies, gross inequalities in income distribution and the many other factors that helped create this situation are not going to be remedied soon. Meanwhile, millions of people have created a solution of their own.

Many are like a woman at a focus group conducted in the Mexican city of Puebla. After her husband was laid off at an automotive factory where he had worked for many years, he could not find work that was as steady or as well paid. He eventually joined relatives in the Los Angeles area who helped him find a job and a place to live.

Although he had entered the United States illegally, he was soon sending back $200 every two weeks. Every payday, he goes to a wire-transfer company to send the money, and his wife picks it up the next morning.

"We kept our house," the woman said. "We kept our boys in school. That money allows us to keep our life here except that now he is there."

Their marriage is now conducted primarily over the telephone, with calls at least once a week to discuss spending, homework, friends and all the other subjects that used to be covered around the dinner table. She worries about the distance between them, but for now their household functions almost as before.

This family and many millions more like it are quintessential players in the era of globalization. Like entrepreneurs who seek out markets, capital and labor around the world, they too hop borders in search of competitive advantage -- Los Angeles is a good place to earn wages; Puebla is a good place to raise children.

The woman, her husband and their children live in what sociologist Manuel Castells calls the "space of flows." This is a timeless place marked by transnational networks operating beyond traditional institutions and communities. Although the term is more often applied to the very rich, it relates to these much humbler people as well.

Not surprisingly, the large amount of money now circulating in the space of flows is attracting the attention of policymakers and financiers.

Many of the largest banks in the U.S. and Latin America have made major investments to capture some of the remittance trade that now mostly goes through wire transfer services like Western Union. They would also like to convert remittance receivers into depositors.

International organizations are trying to figure how this money can be channeled into economic development projects. Many governments in Latin America are also wondering how they can direct these funds to what they consider more advantageous, long-term goals than meeting everyday family needs.

All face a fundamental challenge. Remittance money is generated by people who essentially rejected such institutions. They successfully rebelled against geography and redrew the map of the Western Hemisphere with new networks of economic interconnection. Having escaped into the space of flows, they are not going to be easy to lure back.

Roberto Suro is director of the Pew Hispanic Center, a project of the USC-Annenberg School for Communication.

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