Remittance recession?

The Washington Post is reporting that remittance payments from US resident immigrants to Latin American countries has slowed down over the past two months. While remittances are subject to cyclical economics, much like any other payments, analysts are speculating whether this could signal a more profound shift:

“Many remittance-rich nations would fall into a recession if immigrants began sending home significantly less money, which could encourage more poor Latin Americans to find work in the United States, according to the study and Donald Terry, manager of the Multilateral Investment Fund at the Inter-American Development Bank.”

The article highlights the important role that remittances play in Central American economies, such as Honduras and El Salvador, where they constitute 18 percent of the national income and surpass foreign aid and investment, according to a study by the think tank, Inter-American Dialogue.

The Inter-American Development Bank is studying possible reasons for sluggish payments, noting that anecdotal evidence suggests that raids on migrant communities by U.S. law enforcement officers and fear of deportation has prompted some to curb spending. Other reasons may be saving money to pay U.S. citizenship fees, wagering that a congressional debate over immigration law would result in allowing them to pay a penalty and legalize their immigration status. A downturn in the U.S. housing industry could also be trickling down to immigrants, who fill the majority of U.S. construction jobs.”

For further reading on the role of remittances in aiding developing countries, please take a look at these documents:

• “The role of remittances in the World's Economy”, Immigration Policy Brief, The American Immigration Law Foundation, 2003.
• The Migration Information Source of the Migration Policy Institute has a full overview of the topic, including special coverage of the ‘Year of Migration and Development’ 2006.
• “Migration and Remittances”, an overview compiled by the World Bank.
• “Close to home – The Development Impact of Remittances in Latin America,” World Bank Report, 2006 (pdf).
• “Card-based Remittances: A closer look at supply and demand,” Inter-American Dialogue, 2007 (pdf).
• “International Flows of Remittances: Cost, Competition and Financial Access in Latin America and the Caribbean–Toward an Industry Scorecard,”  Inter-American Development Bank, 2006 (please scroll down the list of documents to download the PDF from the IADB's website).
• “Migrants’ Remittances,” Ch. 2 of a World Bank report on Migration Trends in Eastern Europe and the Former Soviet Union, 2006. To access the report in full, take a look at the World Bank's website on the topic.