Migradollars and Economic Development:

Characterizing the Impact of Remittances on Latin

America

• Self-Financing: Remittances are Big Business in Latin America

Remittances, the funds sent by foreign-based Latin American workers to their families back home (also called migradollars in Mexico where they constitute the third highest source of income after oil exports and tourism), represent one of the major economic trends shaping Latin America’s recent development. They are considerably more important than official development assistance (ODA) and equal the foreign direct investment (FDI) volume for the region. In some of the poorest countries of the hemisphere (Haiti, Guyana and Honduras, to name a few) they account for more than 10% of the GDP, and, in several Latin American countries, remittances per capita readings are higher than the GDP per capita of the poorest 40% of the population.

Despite their prevalence and assumed transcendent importance, the transfer of these funds back to the motherland have not been extensively studied. Indeed, remittances signify a relatively new economic phenomena; they are hard to track and only have been registered by the Inter-American Development Bank (IADB) for the past 10 years. The current economic and financial crisis has resulted in the first drop in remittances since those transfers were first tracked and gives us further insight into their impact on the region. It is therefore a felicitous occasion to examine remittances and to see what impact they have on economic development in Latin America.

For full article click here

This analysis was prepared by COHA Research Associate Felix Blossier