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March 29, 2006 11:42 PM ET
Home economies helped by $54bn migrant cheques

Migrant workers from Latin America and the Caribbean sent home $53.6bn to their families last year, an increase of 17 per cent on 2004.

The rise – documented in a survey to be announced today by the Inter-American Development Bank – confirms Latin America's position as the biggest market in the world for remittances.

For the third consecutive year, remittances to the region exceeded the combined flows of direct foreign investment and overseas economic aid.

The surge in remittances reflects the fact that rates of economic migration outstrip world population growth by a ratio of four to one. The bank said the trend – in a week when the US Senate is to consider legislation that would allow as many as 400,000 new workers to come to the US legally a year – also underlines the need for reform of migration law.

"The shift in international trade, investment and communications has required the world's political and economic system to adapt new rules and mechanisms to meet modern realities," said Donald Terry, head of the bank's multilateral investment fund. "The same needs to be done for the migrant labourers who have become such an integral part of the world's labour markets."

An estimated 25m-27m Latin Americans are living and working abroad, 22m of them in the developed markets of North America, Eur-ope and Japan. Mr Terry said migrant workers from the region now made up more than 20 per cent of the labour force in Madrid, Spain's capital. In the US, Latin American and Caribbean workers constitute an average of 12 per cent of the labour force. "Family by family, worker by worker, migrants are redrawing the map of global labour markets," Mr Terry said.

Improvements in techniques used to monitor the flows of remittances in part accounted for the sharp rise last year. Many migrants continue to use informal channels, and the total could be more than $59bn.

Countries nearest the US have seen the biggest flows, with Mexico drawing some $20bn of foreign exchange earnings from remittances. The five countries of Central America and the Dominican Republic received $11bn.

Brazil got $6bn, Colombia $4bn and the four other Andean economies a total of $9bn. The bank is continuing its efforts to force down the cost of transmission costs of remittances, typically despatched in amounts of between $100 and $300. Commission costs now amount to about 5 per cent of the total, less than half the levels of five years ago.

But Mr Terry said banks could do much more to help integrate migrants into their local financial systems. "Latin American banks are essentially irrelevant to the daily lives of the vast majority of their population."

Meanwhile, BBVA, the Spanish bank that handles about 40 per cent of remittances from Mexico, on Wednesday signed an agreement with banks in India and the Philippines to process their money transfers for immigrants in the US and Canada. India received more than $23bn in family remittances last year, about $9bn of which came from north America. The Philippines received more than $10.6bn. BBVA's transfer service in India will initially handle remittances from 9m people from India living in north America.