Latino Immigrants Sending Less Money Home

More than half of Latino immigrants in the United States are sending less money to their families back home since the Sept. 11 attacks, according to a new study, which could have severe consequences for the region’s economies that have come to rely on the informal cash transfers.

The study, commissioned by the Inter-American Development Bank and to be released today, confirms mounting anecdotal evidence that the deepening U.S. recession and rising unemployment is disproportionately affecting immigrants. Thus, they are sending less cash back to their homelands, a phenomenon some economists have characterized as a new form of foreign aid.

The poll of 1,000 adults born in Latin America but who now reside in the United States found that 7% have lost their jobs since Sept. 11 and 26% have had their work hours reduced. More than half, or 56%, said they have cut back on the amount of their remittances.

Although the study does not quantify the drop-off, Don Terry of the Washington-based Inter-American Development Bank, said the reductions could be in the billions of dollars if the economic downturn persists.

“We are concerned about the significant negative economic impact on the region this could have,” Terry said. An estimated $13 billion was sent by immigrants from the United States to Latin America last year, half of it to Mexico.

Any significant decline in the money flow is bound to hurt countries like El Salvador, where immigrant cash transfers account for 13% of its economic output. In rural regions of Mexico, one in every 10 households depends on remittances from family members in the United States. Until Sept. 11, Mexico was on pace to receive about $9 billion in remittances, officials said, which would have been a 35% increase over 2000. The increase was attributed in part to growing immigrant affluence but also to improved methods by which the central bank measures the cash flow.

Now, with U.S.-based immigrants losing their jobs and the tide of northward immigration estimated to be down as much as 25% since Sept. 11, the $9-billion figure seems less attainable. The poll, which was taken after Sept. 11, found that seven of 10 questioned send regular cash payments of some amount to family members in Latin America. Four-fifths of respondents send money via electronic or bank transfer, while one in five sends money through the mail or with friends.

The vast majority of remittances--more than 90%--are spent by recipients in Latin America on consumer goods, other studies have found.

But three in five of those questioned in the Inter-American Development Bank poll said they would consider investing in development projects that generated jobs in their home countries if the right sort of proposal emerged.

That willingness is encouraging to multinational development groups such as the IADB--as well as to governments including Mexico’s--which have long sought to channel remittances into more productive, job-creating uses that might curb levels of emigration. Results of such projects to date, however, have been spotty.

The development bank said the respondents of the poll mirror the overall Latino immigrant population in the U.S., with two-thirds not yet citizens, and about the same percentage of Mexican ancestry and with household income of less than $30,000.

For three of every five Latino immigrants polled, the amount of the average remittance sent home was more than $100, though the study did not specify annual average totals of money sent home.