Toward the Mainstream: Remittances and Development in Latin America and the Caribbean

By Manuel Orozco
October 2, 2007

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Remittance transfers are one of the manifestations of contemporary transnational family ties and foreign labor mobility. In addition to sustaining millions of families, these flows contribute to increase savings among recipient households, and in turn strengthen financial institutions and a country’s economy. Although the international flow of remittances continues to increase, growth has slowed in some corridors since mid-2006. The growth slowdown in remittances reported to Mexico and Central America can be attributed to a number of factors, including improved recording of remittance flows, unemployment in the U.S. construction industry, and anti-immigrant sentiment surrounding the U.S. immigration debate. Still, with appropriate policy tools, the impact of these flows will have potential development implications in the countries where these flows are arriving.

This congressional testimony addresses four issues: the problems of remitting despite a demand for financial services, lessons learned when financial intermediation exists, current dynamics in the remittance environment and practical recommendations for U.S. cooperation.