Sending money home

The vital role of workers who send their money home to Latin America and how they can create a "brai

Bolivian President Evo Morales and the Latin American community in Europe are among opponents to new European legislation affecting the rights of migrants in the EU. Morales described the Returns Directive, which allows extended detention for undocumented workers and a Europe-wide ban on re-entry, as ‘draconian’, and Amnesty International have expressed deep disappointment the Directive was passed.

This is not only a human rights issue. It also raises concerns about the impact of restrictions on the ability of migrants to contribute, through their remittances, to the development of their countries and communities of origin.

In 2007, Latin America and the Caribbean countries received $66.5 billion in remittances from the US, Europe and Japan – more than they received from Foreign Direct Investment and Official Development Assistance combined. About 15% of remittances come from Western Europe, including the UK (which ranks third after Spain and Italy). These are important for the livelihoods of many Latin Americans, particularly the women who are the main recipients and who spend most of the funds on basics, such as food.

Remittances to the region have slowed in the current economic downturn and the credit crunch is taking its toll. Spain is now the source of 36% of all remittances to Bolivia and is soon expected to surpass the US as the main source of remittances for the Andean Region. The property slump is hitting many migrants working in Spain’s construction sector, and this has a direct effect on remittances to Latin America.

While this is a problem for a country like Bolivia, it is not yet cause for wider alarm. Most remittances to the region go to Brazil and Mexico, but unlike the poorer economies in the region, they account for just 1.1% and 2.8% of GDP, respectively.

Rather than focusing on the source and amount of money, important though that is in some countries, regional policy-makers could focus on good practices in the use of remittances to promote pro-poor growth and local development. Mexico’s 3x1 para Migrantes progamme, for example, encourages migrants to invest remittances in local development initiatives by matching their contribution with funds from the municipal, state and federal governments. This has the potential to harness the funds to benefit the local community, and reverse the vicious migratory pressures that force Latin American and Caribbean men and women from their countries.

Even if a migrant’s remittances are reduced in the current economic and anti-immigration climate, both governments and the private sector should focus on ways to take advantage of the intellectual capital that migrants gain in their host countries. There is little talk of initiatives to benefit from the brain gain in the present debate, which still revolves around the notion of a brain drain. Latin American embassies could convene scientists and entrepreneurs among their diasporas to gather knowledge that could benefit national development. Government could provide incentives for entrepreneurs to set up new enterprises, based on the innovative ideas or technologies found in developed countries. And civil society organisations and the private sector could foster cross-regional partnerships and joint-ventures based on the new knowledge.

Latin American and Caribbean countries have the opportunity to focus on the source of the money or the source of the migrants. The former may be more politically attractive, but we do have the capacity to address the latter. After all, pro-poor and sustainable development is the only valid answer to this challenge. Mr. Morales and other regional leaders need to recognise that good policies are good politics.

Enrique Mendizabal is a research fellow at the Overseas Development Institute