The cost of sending remittances to this region is among the lowest in the world…
Migration
Over 30 million people emigrate abroad from Latin
America and the Caribbean (LAC). For small and
economically dependent countries, migrants
constitute one quarter of their population. Until
recently, the United States was the main destination;
however, increasing migration to Europe and
intraregional mobility have changed this pattern.
Italy and Spain are two of the main destinations
in Europe, whereas Argentina, Brazil, Costa Rica
and the Dominican Republic are the main
intraregional destinations.
Remittances
LAC received almost US$68 billion in remittances in
2006. Mexico received US$24.3 billion and South
America followed, receiving only slightly less. Though
the region’s economy is volatile and experiences
boom-and-bust cycles, remittance flows have
remained steady for many years. Annual transfers
by migrants reach some US$2,200 on average,
although in some countries, such as Jamaica, this
number is higher. On a macro level, and as a country’s
average in LAC, remittances amount to 3 per cent
of GDP and 11 per cent of exports.
Rural remittances
Remittances sent to rural regions represent about
one third of all flows. These amounts have been
increasing as migrants move to different parts of their
home countries. An interesting example is Mexico:
remittances from the State of Chiapas are the fastest
growing in the nation and most of them are sent to
rural areas. However, the percentage of remittances
to the rural areas of Latin America is greater among
migrants working within the region in neighbouring
countries. Bolivians in Argentina are predominantly
rural migrants sending money to areas near main
urban centres, while Nicaraguans in Costa Rica
transfer money to rural areas in the southern parts
of their home country.
Market and financial access
Money transfers to LAC are predominantly processed
by licensed MTOs. However, over the past three years
other competitors have emerged as players (within
the United States and Spain for transfers to Latin
American corridors), such as banks and card-based
operators offering account-to-account transfers.
Nevertheless, within intraregional corridors, significant
informality in fund transfers still exists. The cost of
sending remittances to this region is among the
lowest in the world, averaging 7 per cent to send
US$200, largely because of the extent of competition.
As in other parts of the world, financial access in LAC is relatively limited, even among recipients of remittances, who tend to save more. With some exceptions, there is little access to formal banking institutions. Credit unions and microfinance institutions are stepping in to offer services to recipients and thus increase the cross-sale of financial products. The end result is greater financial intermediation and transformation among clients. Examples include Mexican rural banks (cajas populares), or Jamaican building societies, which benefit thousands of clients.
Source: IFAD
