WASHINGTON, D.C. – The amount of money being sent from Latinos abroad back to families in their homeland – an important buoy for the region’s economy – will likely fall this year, representing the first decline since the Inter-American Development Bank (IDB) began measuring remittances in 2000, the IDB said this week.
The IDB reported Monday that remittances to the region reached $69.2 billion in 2008, an increase of less than 1 percent from 2007.
In the fourth quarter of last year, remittances fell 2 percent compared with the same period in 2007, and the bank says that the trend accelerated in January 2009, adding that a reduction in remittances of between 11 and 13 percent is expected for the full year.
“While it is too early to project by how much remittances may decline in 2009,this is bad news for millions of people in our region who depend on these flows to make ends meet,” said IDB President Luis Alberto Moreno.
The expected decline in 2009 comes after years of double-digit increases in remittances, the IDB said, emphasizing that for some countries in the region, money sent home from abroad amounts to as much as 12 percent of gross domestic product.
The IDB said in its last report on remittance flows that it is probable that foreign direct investment and income from exports and tourism will continue to come under pressure during 2009, thereby increasing the importance of remittances.
The study put special emphasis on the fact that remittances are an important tool for reducing poverty, since more than 60 percent of these payments are used to cover daily necessities such as food, clothing and housing.
It also mentioned that exchange rates are playing a much more significant role in the determination of the effect of remittances on the receiving nations, as the falling value of many Latin American currencies versus the U.S. dollar helps cushion the impact of the decline in remittance payments.