Governments from brazil colombia mexico and peru

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Unformatted text preview: significance in a few countries. Although there is large uncertainty about the depth and duration of the crisis, the effect it will have on remittance flows, and its impact on poverty via the remittances channel, available evidence points to a relatively small decline of remittance flows to LAC, resulting in relatively small increases in poverty rates. Yet, these declines would imply falling into poverty for about 3.4 million additional people. More data collection is needed to be able to ascertain the distributional and gender impacts of the current crisis on remittances. One of the few short run policy options available to LAC governments to reduce the impact of the crisis on poverty is related to the cost of sending remittances. For remittances originating in the U.S. these vary from US$ 9.17 for a US$ 200 transfer to El Salvador to US$ 19.04, on average, for the same amount transferred to Dominican Republic. Now more than ever it becomes imperative to reduce these costs. Possible ways to reduce these costs include: (i) issuance of consular cards that allow migrants to open bank accounts, (ii) postal agreements, (iii) promote the use of mobile telephones for money transfers among private providers of telecommunication services, (iv) improve information on transfer costs both among senders and recipients and (v) promote more competition in the market for these financial services, including lowering regulatory cost of opening bank branches. For the most vulnerable recipient families, short run compensation of losses through existing or new social protection programs is also a possibility. In the long run, governments can continue to enhance the development impact of remittances. The impact of remittance transfers on the growth rate of recipient economies depends on whether this transfer is invested or consumed. In the LAC region, remittances are used mostly for consumption purposes. Governments can continue to provide incentives to increase the proportion of remittances devoted to investment, by raising education levels of remittance receivers (which increases the returns to investment); improving the functioning of financial systems so that, even if remittance recipients themselves are not inclined to invest, the proportion of remittances that is not consumed is channeled to investment through financial intermediation; and reducing macroeconomic distortions and institutional weaknesses that reduce incentives to invest. 127 128 9. WILL FDI BE RESILIENT IN THIS CRISIS? Cesar Calderon and Tatiana Didier February 2009* Although FDI flows have tended to remain resilient during previous crises, they may not behave in a similar fashion during the current crisis. Why? In past crises, the stability of FDI flows was significantly associated with an increase in mergers and acquisitions (M&A), reflecting "fire‐sale FDI". In the present crisis, by contrast, M&A activity decreased significantly in the last quarter of 2008, and this trend may continue as long as the global crisis constr...
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