The Effects Of Remittances On Latin America And The Carribean

In order to evaluate the effects of migrant labor to the United States and Canada and the remittances those laborers are sending home to Central America it is imperative to see what is causing these individuals to leave their homelands. For the past twenty years the phenomena of globalization has taken hold and the world has never been the same. This process has lead to sever inequality among the world's nations and has lead to a steep influx of immigration to the countries that "have" from the countries that "have not".

The world is growing increasingly interconnected through this process called globalization. Globalization in essence is a process of deterritorialization, where through the use of new and innovative technological advances, boundaries drawn by countries are now virtually invisible. (O'Brian & Williams, 138) These advances have made it possible and easier to travel long distances and a relatively short amount of time, or to communicate with someone on the other side of the world virtually instantly. Brian Atwood, former administrator of the US Agency for International Development (USAID) has this view about globalization: "...globalization has a great potential to create competitive economies and to facilitate access of information and technology. The problem of globalization is that it is now alienating the developing countries". It is clear to see why Mr. Atwood has this view. The countries that are going through these vast technological advances are the rich countries and many parts of the world lack, in comparison, to these more wealthy "first world" countries. So while the rich are reaping the benefits, the "developing nations" lag behind. It is safe to assume that globalization is not occurring at the same rate and pace in all regions and countries of the world. (O'Brian & Williams, 138)

This uneven process of globalization is making the countries that lack struggle to keep up with those that are striving and, in all certainty, many of the people are at or below the poverty line and are struggling to survive. These countries have little opportunities for their inhabitants to strive so the people go abroad to make a living. This is especially common in Central America, especially Mexico. Since the bustling economies of the United States and Canada are in such close proximity, that is where they chose to go. The people who leave and go to work in the other countries are called migrant laborers. In many cases they stay in the migrated country illegally. The money they send back to their home countries is called remittances. Informally defined, remittances are typically transfers from a well-meaning indivdual or household that are targeted to meet the specific needs of the recipients, by doing so they tend to reduce poverty. (Ratha, 2005) It is hard to estimate the amount of money that is being sent to the native countries but in 2005, approximately $45 billion was sent from the United States to Latin American and Caribbean countries. That is twice the amount of what was sent 10 years prior, (Cevallos, 2005) but keep in mind, that is only a rough "officially tracked" amount. Many of the migrant laborers work jobs that are "off the books" and send or personally deliver cash. It is very hard to track those figures.

The rich countries have used technology and big business to facilitate their global ties and strive through globalization. The poor countries, on the other hand, do not have that option. Instead they are using "human capital" to claim their steak in the global world. Orozco states, "family remittances... have constituted a major factor in integrating societies into the global context economically and socially. (2002)

Remittances are usually sent home by the use of a "sending agent". In most cases it is by wire transfer companies like Western Union who charge the sender a flat fee or percentage to wire the money along with a currency conversion fee. Another way to send the money is by bank account, by using this method the fees are reduced to, in most cases, exchange rate exponents. Some people also personally deliver the money or send checks; those too incur exchange rate manipulation charges. Consequentially, the wire transfer companies, which seem to be the easiest and most accepted way to send the money, have made a great fortune due to the sending of remittances.

Philip Dominguez, a 28-year-old car service driver in Astoria, NY migrated here in 2004 from El Salvador. He works 6 days a week at almost 10 hours a day, and makes approximately $3,000 dollars a month. He lives here on his own and supports his wife and child who live in El Salvador; his wife does not work. Martinez says that he sends all of his extra income, after having paid for basic living expenses (rent is $1000 a month), home to his wife. He plans on working in the states for another 3 years where he will then go back to El Salvador and run an excavation company with his brother. The exchange rate is so that the US dollars go very far in El Salvador and he claims that he already has enough money to buy five machines (backhoes, bulldozers, etc...). (personal communication, February 20, 2006) Martinez is a classic example of a migrant wage laborer. He came to the United States for a specific purpose, to get capital, which was unavailable to him in his home country. He will be in the United States for five years, working almost every day of the week and sending every last penny back home, building a nest egg and a better life for his family.

The fact of the matter is that the majority of people living in Latin America and the Caribbean are at or below the poverty line. Cevallos states that "in 11 countries studied - Bolivia, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, Peru, and Uruguay - 50 percent or more of the people who live in recipient households would drop below the poverty line if it were not for the income they receive through [remittances]"(2005). These remittances are imperative in the welfare and survival of the recipients. In many cases they provide for food and healthcare for the recipient families. In families where the need is not so great the remittances often go towards things like secondary schooling or start-up capital for businesses. In any case, as Cevallos claims, "remittances do not in and of themselves represent a solution to poverty... [in most cases] the funds represent temporary relieve from poverty for families rather than a permanent route to financial security".(2005)

To understand this more clearly, take for example Dominguez, the livery driver. He makes a pretty decent living, most migrant laborers do not make as much as he. He still has to pay for his living