Friday, September 24, 2010

Remittances and development

There has been considerable academic debate about the economic development impact of remittances.  Some of the key arguments:


--Remittances bypass the state and therefore promote economic development at the local level, unhindered by bureaucracy or corruption

--they inject capital into Latin American economies that otherwise simply would not be there, thus alleviating poverty


--they serve to intensify economic dependence on the developed world, primarily the United States

--they tend to be spent on consumer goods as opposed to being used to create new businesses or infrastructure at home

In this context, it is good to see the State Department's announcement of the Building Remittance Investment for Development Growth and Entrepreneurship (BRIDGE) with El Salvador and Honduras.  The idea is that remittances flow through domestic financial institutions, so with assistance offer an opportunity to use that money for public works, commercial development, etc.  This wouldn't affect anyone's access to their money, and presumably would act like a bank does (though the specific "in-country financial institutions" are not named).

A critical aspect of such a plan, though, is to avoid the problem noted above of having the money sucked away through corruption.  That issue isn't mentioned.


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