One Way Ticket or Circular Flow: Changing Stream of Remittances to Latin America
Inside houses held together by a collection of sticks, mud brick and plastic table cloths one can hear the hum of a stainless-steel sub-zero refrigerator and the shrill buzz of a flickering flat screen television set. These appliances of modern convenience mix casually with poverty, a contrast almost obscenely commonplace throughout many parts of Latin America and especially Central America. Small towns in the campo, where unemployment seems to run close to 90 percent and the only remaining males are either below the age of sixteen or above the age of sixty, receive a steady stream of cash sent by former residents living more than a thousand miles away.
Remittances from family members working in the U.S. constitute a significant portion of the GDP in many Latin American countries. In Haiti, remittances compose a record 30 percent of GDP, followed by Honduras (25.6%), Guyana (24.5%), Jamaica (18.5%), and El Salvador (18.2%). As a whole, Latin America receives USD 58.9 billion every year, dwarfing both U.S. FDI (USD 19.2 billion, 17% of total) and foreign aid (USD 448 million) to the region combined. While remittances do not ultimately solve economic deficiencies in these countries, many families rely on them to survive. These payments also help families send their children to school, obtain better healthcare, and improve their homes. Complementing direct cash payments to family members, cross border organizations, known as Home Town Associations (HTA)
, link immigrants to their home communities by creating communal funds to improve local infrastructure and undertake development projects. Moreover, remittances create an even larger economic and social community throughout the Americas, held together by a circular flow of people and money. This blog was prepared by COHA Research Associate Trevor Cohen.
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About the COHA Blog: Present and Future Content
Over the last two weeks, the COHA Blog has been evolving, now adding immigration to its agenda of issues being addressed from a variety of different perspectives. The above piece discusses the relationship between the stream of money sent back home by Latino immigrants working in the U.S. to an increasingly restrictive border, the diminishing world value of U.S. earnings, and strong economic growth in many Latin American countries. While millions of families in the region rely on remittances sent by husbands, wives, and children living abroad to survive, many factors may cause this relationship to stabilize or even reverse in the coming years as Latin America becomes more independent of the U.S.
Next Tuesday, we will showcase the concept of the “New Latin America,” launching another two week series. In it, we will discuss how different aspects of Latin America have evolved over the years, while others still remain the same.
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