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Billions in Motion: Latino Immigrants, Remittances and Banking

Pew Hispanic Center
Multilateral Investment Fund Executive Summary
 By Roberto Suro

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Until recently, the money management practices of Latino immigrants in the United States aroused little attention outside their own communities. That changed as the remittance flow doubled in size during the second half of the 1990s. Although the size of the average remittance transfer is miniscule—$200 to $300—in the world of international finance, the cumulative sums have now captured the attention of government policymakers and bankers in the United States and Latin America. Remittances to Latin America and the Caribbean totaled $23 billion in 2001, according to estimates by the Multilateral Investment Fund.

Not long ago this was a cottage industry in which cash was often hand carried across borders. In the 1990s it evolved into a traffic dominated by wire-transfer services such as Western Union, and now it is becoming increasingly formalized as more credit unions offer remittance services and with the introduction of electronic banking products that allow a remittance deposited in an Automatic Teller Machine (ATM) in the United States to be retrieved almost instantly from an ATM in Latin America.

Central banks across the region are tracking remittance income more carefully which has somewhat boosted the numbers they report. Nonetheless, there seems little doubt that the remittance flow has continued to increase over the past two years even as the U.S. economy dropped from its boom time peaks. In 2000 remittances to Mexico, El Salvador, Guatemala, Honduras and Nicaragua—nations that receive almost all their money transfers from the United States—totaled some $10.2 billion. This year that figure could reach $14.2 billion or more, a flow of $39 million a day. By 2005 the sum, which does not capture all remittances to Latin America, will go beyond $18 billion, according to projections by the Pew Hispanic Center.

These figures are evidence of a kind of economic activity that is resistant to the U.S. business cycle. They also reflect the needs pressed by economic hard times in Latin America and efforts by governments in those receiving countries to smooth the flows. Moreover, they are indicators of an international financial activity that has grown markedly not only in size but also in the levels of competition and efficiency in the last few years. And, those sums are also the monetary expression of a profound human bond between people who come to the United States to work for long hours at low wages and the families they left behind.

Over the past two years Wells Fargo, Bank of America,and Harris Bank, as well as many other financial institutions, have launched initiatives to capture a larger share of the Latino immigrant market. Some U.S. banks have acquired stakes in Mexican banks or established cooperative arrangements to facilitate remittance flows. Many of the nation’s credit unions have also created such programs and have entered the international money transfer arena.  

What has not changed is the population of remittance senders—except that it continually grows larger. They are, as they long have been, mostly recent immigrants with little education and low earnings and not much familiarity with banking systems either in the United States or in their home countries.  Because they are both the generators of wealth in this industry and the prime consumers, their decisions about how to manage their money will largely determine how the remittance flow evolves.

 [Billions in Motion: Latino Immigrants, Remittances and Banking PDF]

 [Billions in Motion: Latino Immigrants, Remittances and Banking ZIP]

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November 24, 2002


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