The Economy and its Impacts

Obviously the economy is a key issue right now with the stimulus package in the works and all sorts of social services being cut first in city and state budgets. This article demystifies what's going on in terms of how the US economic downturn is affecting the countries whose economies depend on remittances coming in from the United States. The point that what happens here affects millions of other people, is powerful in and of itself.

Who's Hurting Now?

By Francis Calpotura, Founder & Director, Transnational Institute for Grassroots Research and Action (TIGRA)

Recently, we’ve seen a few articles about the impact of the economic crisis on the amount of money that our families send back home. It mostly tells a tale of falling remittances due to economic hardship, but fails to capture the whole story. Here’s the real scoop:

#1: THERE HAS BEEN A SLOWDOWN IN LEVEL OF REMITTANCES IN 2008, BUT NOT AS MUCH AS EVERYONE SEEMS TO CLAIM.
• Remittances to the global South (“developing countries”) is $283 billion in 2008 compared to $265 billion in 2007, an increase of 7%. The World Bank is predicting a decrease of 0.9% in 2009, but will increase again by 6% in 2010.
• Overall, there is a 1.5% increase for Latin America & the Caribbean in 2008 totaling $67.5 billion. The most affected in the region are Mexico (decrease of 2% in 2008, and Ecuador about 7%). But the rest of Latin America experienced an increase in 2008, but not as big as previous years.
• Remittances are slowing but still is very robust outside of Latin America, with increases in Kenya (11%), Philippines (18%), Pakistan (18%), and Bangladesh (36%).

#2: There are several reasons for the resilience of remittance flows during economic downturns. (a) Remittances are sent by the cumulative flows of migrants over the years, not only by the new migrants of the past few. This makes it persistent over a longer period of time. Remittances will only stop growing if migration stops over the course of a decade or so. And that's not what's happening. For example, the Philippines sent out 1.4 million workers overseas in 2008, a whopping 28% increase over 2007! The thunder of footsteps leaving countries will continue. (b) Remittances are a relatively small part of migrants' incomes (10-30% in most cases), so they can continue to send even when hit by economic shock with their savings, etc. and (c) Remittances are economic responsibilities of migrants to their families and will not cease even under extreme economic duress because their loved ones depend on them. HOWEVER, WE CANNOT OVERLOOK THE FACT THAT (IM)MIGRANTS ARE ONE OF THE MOST HARDEST HIT BY THE ECONOMIC DOWNTURN. PEOPLE ARE HURTING, AND WILL CONTINUE TO SACRIFICE IN ORDER TO SUPPORT THEIR FAMILIES.

#3: BUT WHO'S NOT HURTING? Western Union enjoyed another banner year of profit during 2008; WU's revenues increased by 10% from 2007, making almost $5.4 billion dollars. The second largest remittance company, MoneyGram International, enjoyed an 18% increase in profit in 2008 over the previous year. Both are projecting higher profits again in 2009, EVENTHOUGH EVERYONE'S PREDICTING A DROP IN OVERALL REMITTANCES WORLDWIDE.

Once again, these companies are making obscene profits at a time of economic pain for families worldwide.

So, the next time you see another article in your local paper about the impact of the economic crisis on remittances, use these data to write an op-ed that asks companies like Western Union and MoneyGram International to do their share in this economically-challenging times to lower their prices and reinvest in communities.