Friday, June 01, 2007

Remittances in Guatemala

The AP has a story about the effects of remittances on local communities in Guatemala and Mexico. There’s been a shift in perceptions about remittances, highlighted not only in academic literature but also in the media. For years, they were viewed as largely positive because unlike foreign aid they bypassed corrupt governments, went straight into people’s pockets and gave a needed boost to ailing economies.

It’s unclear, however, how much that is happening. The story on Guatemala discusses the closure of local looms because their potential workforce prefers to live on remittances and wait to emigrate rather than accept low wages.

The article highlights some issues that really require more study:

--how do we (a global “we”) ensure that remittances contribute to, and do not stunt, local economic development?

--is it possible to encourage businesses to pay better wages rather than close? Basically, at what wage will local workers eschew emigration?

--if, as the story says, some local businesses are simply going further out into the countryside to find workers, what is the economic impact? The impact on poverty?


boz 9:27 AM  

Also interesting, as a Bloomberg article recently noted, remittances also mean that decreases in the US economy can have greater impacts in those communities and countries. The weak US housing market is currently being blamed for the change in the Mexican peso, with dropping remittances as the link. A community that is living off remittances has little to fall back on if that money flow suddenly slows or stops.

Greg Weeks 10:30 AM  

And also that their economies depend more heavily on U.S. immigration policy.

Miguel Centellas 1:27 PM  

This is, of course, a widespread phenom. My friend MABB posted this:

As for February of this year, remittances from Bolivians living overseas surpassed foreign direct investment as a source of capital.

Greg Weeks 1:33 PM  

Of course it's widespread--the question is how to evaluate the effects, and I think that is changing from several years ago.

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