Neoliberal Reform and Migrant Remittances: Symptom or Solution?

Abstract

In the last five years, the international development community has discovered what appears to be a new source of hope for many developing countries: the large and rapidly growing flows of remittances from migrants to their families and communities back home. According to a recent World Bank study, remittances to middle- and low-income countries have grown from around $31 billion in 1990 to an estimated $167 billion in 2006. These funds now account for approximately 30 percent of total financial flows to developing countries, and they exceed all private and public capital inflows in 36 out of 153 developing countries (Fajnzylber and Lopez 2007; Ratha 2005: 269). Although remittances to Latin America and the Caribbean (LAC) grew more slowly in 2007 (and actually declined in Brazil), the region continues to capture a sizable share of the total, receiving an estimated $66.5 billion in 2007 (MIF 2008a).¹ These funds have a significant impact on the region’s macroeconomy, exceeding the combined total of foreign direct investment and foreign aid (Terry 2005: 3). As shown in table 10.1, Mexico and Brazil receive the highest volume of remittances, but remittances represent a much higher share of GDP in smaller, poorer countries such as Honduras, El Salvador, and Nicaragua. Remittances also have a major impact at the household level. Although the results vary depending on methodology, most studies find that they reduce poverty, increase savings and asset accumulation, and improve health and education in remittance-receiving households, particularly in rural areas (see, e.g., Chimhowu et al. 2005; Fajnzylber and López 2007; Hagen-Zanker and Muñiz Castillo 2005; López Córdova 2004; Lozano Ascencio 2005; Orozco 2004; Rodríguez Ramírez 2005).