Unformatted text preview: in November and December 2008 for these six countries was 8.3 percent below the level for the same two months in 2007. In Central America, the weighted average decline in the first quarter of 2009 was 4.4% lower than the same period of 2008. Figure 2. Actual and Expected Growth of Remittances to LAC (year‐to‐year % change) Figure 1. Total Flow of Remittances to LAC (percentage of GDP) 2.5% 30% Base
15% 1.5% 10%
0% 0.5% -5%
2011 f 2010 f 2009 f 2008 e 2007 2006 2005 2004 2003 2002 2001 2000 1999 1997 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 Source: DECPG estimates. GDP figures are from World Development Indicators 2007. Does not 1998 -10% 0.0% Source: DECPG estimates. Note: Does not include Chile, Suriname, and Uruguay. In Mexico rates of growth started to be negative for several consecutive months as early as January 2008 in nominal terms, but remittances have increased in real terms. A sharp depreciation of the nominal exchange rate, coupled with lower inflation, has more than offset the decline in remittances in nominal dollars. IMF projections are that, in real terms, remittances to Mexico increased by 9.8 percent (annualized) in the last quarter of 2008. Yet, for the region as a whole, the gains from depreciation 157 Mexico, Dominican Republic, El Salvador, Guatemala, Honduras and Jamaica. 124 would be eroded by a continued decline in foreign exchange flows, and in dollarized economies or countries with more inflexible exchange rates the depreciation cushion is either absent or small. World Bank projections based on GDP growth projections indicate that nominal remittances to LAC will fall by 4.4 percent in the base case and 7.7 percent in the low case scenario.158 Projections vary significantly by country. These projections are based on GDP forecast of both sending and receiving countries. But, if remittance senders in the U.S. are disproportionately affected by the recession, remittances may decline more than GDP‐based forecasts imply. To examine this, we look at the three main factors that determine the volume of remittances: (a) the number of immigrants, (b) their employment status and (c) their earnings. The number of potential remittance senders from the United States is very unlikely to decline substantially. 159 There are 45 million Latinos in the country, of which about 13 million send remittances. Of these, 8 million send remittances on a regular basis, and an additional 5 million are occasional senders. The net positive flow of immigrants may drop from its recent levels of 1 million per year (from all countries of the world), but it is extremely unlikely that the net flow would turn negative. Research has shown that LAC migrant’s main motivation is to send money back home and, since they lack access to social security or other sources of income, they typically go to extraordinary lengths to remain employed or find new employment. Only illegal migration could change quickly in response to economic cycles. However, illegal immigrants are quite resilient to worsen...
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