Throughout Costa Rica, Western Union money transfer locations see a steady flow of clients for one specific reason: remittances.
In 2008, Costa Rica received an estimated $635 million in remittances, funds transferred by foreign workers to their home countries. Over 70 percent of remittances received in Costa Rica in 2008 were sent from the United States. However, at most local Western Union sites, the majority of remittance transfers are not incoming funds. Rather, they are funds leaving the country, bound primarily for Nicaragua.
At two Western Union centers visited by The Tico Times on Wednesday, of the 14 people surveyed in line, 13 were sending money to Nicaragua. According to the International Organization for Migration (IOM), the number of remittances sent from Costa Rica to Nicaragua has increased around 2 percent this year, despite the worldwide decrease in remittance funding.
“Costa Ricans emigrate to make more money and send it home,” said Ricardo Monje, economist and executive director of the Costa Rican High Technology Advisory Committee (CAATEC), which studies economic trends. “Nicaraguans immigrate to Costa Rica because there are no jobs in Nicaragua and they can find work here. The money they send home covers basic needs, such as clothing, food and housing costs.”
In July, the World Bank released a study that says worldwide remittances are expected to fall 7.3 percent, from $328 billion in 2008 to $304 billion in 2009. In Latin American countries, the amount of remittances is expected to fall from $64.454 million in 2008 to around $59 million in 2009, an expected drop of between 6.9 and 9.4 percent.
The worldwide decrease in remittance funding appears to be a result of the global economic crisis, which has seen spikes in unemployment, decreases in investment in infrastructure and, most importantly for Central American emigrants, fewer construction jobs.
“Workers from Costa Rica, Mexico and other Central American countries receive most of their remittances from construction jobs in the U.S.,” said Salvador Gutiérrez, project technician at the IOM. Also, “when the automotive industry crashed, thousands of employees from Mexico and Central America lost their jobs. For some countries, the loss of remittance money has significantly impacted their economies.”
Costa Rica has not been impacted by the decrease in remittances to the same extent as other Central American countries. Although the estimated $635 million in remittances received in Costa Rica is expected to fall by about 5 percent, remittances make up only 2.4 percent of the country’s gross domestic product (GDP), according to the Central Bank (BCCR).
“Remittances are not as vital to Costa Rica (as they are) to other countries, such as Nicaragua, the Dominican Republic and Colombia,” Gutiérrez said. “Many people in Costa Rica who receive remittances use the money to cover their needs, but there are also many who use remittances to buy luxury items, such as plasma televisions or better cars. (Remittances) are not as important to providing basic needs here as they are in other countries.”
According to the World Bank, remittances account for 18.2 percent of the GDP in El Salvador, 12.6 percent in Guatemala, 21.5 percent in Honduras and 12.9 percent in Nicaragua.
“Remittances provide a lifeline to many poor countries,” said Dilip Ratha, lead economist at the development prospects group of the World Bank. “Although they remain resilient, even a small decline of seven or 10 percent can pose significant hardships on the people and on governments, especially those facing external financing gaps.”
The increase in remittances to Nicaragua is somewhat of an anomaly in the current economic crisis. Monge explained that Nicaraguan workers are welcomed in Costa Rica, as the remittances sent from Costa Rica to Nicaragua provide benefits to both countries. A majority of Nicaraguans working in Costa Rica work in construction, and work to improve infrastructure of the country, while the remittance money sent to Nicaragua helps mitigate poverty and assists in providing livings for many families.
“The Costa Rican economy is stable and is continuing to develop,” said Monge. “The opportunities available in Costa Rica are very appealing to foreign workers in poorer Central American countries.”
The total amount of remittances received in Nicaragua was estimated by the World Bank at $818 million, with an estimated 15 percent coming from Costa Rica. If worldwide remittances do fall in 2009, it will be the first decrease since 1985.
Receivers (people who receive remittances from
family or friends living outside of Costa Rica)
* One of 10 Costa Rican adults receives ? remittances from family members or friends in the United States (71 percent), Europe (13 percent), Latin America (12 percent) or Canada (3 percent).
* The average transaction is $250.
* 80 percent of the remittances are used to cover daily expenses, such as food, medicine, utilities and clothing.
* Costa Ricans living abroad: California (13,232), Florida (11,248), New Jersey (11,175), New York (7,845).
* In 2008, remittances to Costa Rica totaled $635 million.
Senders from Costa Rica
* In 2008, remittances sent from Costa Rica were $183.5 million.
* Main destinations: Nicaragua, Colombia and Panama
Source: Western Union