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A Yen for Remittances

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New research from Japan suggests that remittance flows from Japan into Latin America, particularly into Brazil, are as much as 400 percent higher than hitherto estimated, and have been for some time.

BY TRICIA JUHN
InfoAmericas

Last year, some $60 billion in remittances flowed into Latin America.  The United States accounted for almost half this figure.  Japan, the world’s second largest economy, was the second largest single remitter, accounting for nearly $6 billion, or 10 percent of the total remittance inflows.  This figure is equivalent to nearly 60 percent of all remittances from Western Europe, and equivalent to more than two-thirds of Latin America’s exports to Japan.

The behavior of remittance senders in Japan is distinct from their American counterparts, implying important nuances for marketing consumer goods and financial services to both the sending and receiving markets.   

BANKED, MOBILE, LEGAL

There are about 350,000 Latin Americans working in Japan (dekasegui) remitting to just over 2 million Japanese and their descendants in Latin America (nikkeijin).   More than 85 percent of the Latin workforce in Japan is legal, and 90 percent of them are banked.  Banking penetration is so high that Latin American banks, particularly the largest Brazilian banks, (Itaú, Banco do Brasil, Bradesco, and Banespa) maintain a presence in Japan, offering high-tech inter-bank transfers across borders at competitive rates.

The Latin work force in Japan stays for long periods of time and rotates more frequently between home and host country as compared to Latin workers in the United States.  80% of Latin workers in Japan stay more than three years; 28 percent stay more than 10 years.  At the same time, 50 percent of Brazilian workers in Japan are “repeaters” – they have come and gone more than once, taking advantage of their coveted permanent resident (teijushin) status.

The Senders:  60 percent of dekasegui are concentrated in 16 small municipalities in Japan (near their employers’ manufacturing facilities), where they constitute 10-40 percent of the local population. They are distinguished not only by their sheer numbers, but also because they are employed in the organized manufacturing sector, with all the implied benefits – unions, insurance, pensions, etc.  Most other foreign workers are limited to the service sector, where jobs were far more vulnerable.

The Receivers: 85 percent of nikkeijin are in Brazil, followed by much smaller communities in Argentina, Peru, and the rest of the region.  The rotating-return nature of migration means that nearly every Japanese family in Brazil has or has had a family member working in Japan, implying a very sophisticated, trans-national market, earning and spending in at least two very disparate cultures.

DYNAMIC AND CHANGING

Until 1990, Japanese labor law forbade foreigners from taking unskilled jobs outright. 

A labor shortage in the manufacturing sector persuaded the Japanese government to offer manufacturing jobs to nikkeijin - Latin Americans who had a parent or grandparent of Japanese origin.  The law was changed to allow the nikkeijin (now dekasegui) to take any job, skilled or unskilled.  

The first Latin American migrants to take advantage of the revisions to the labor law started out as temporary guest workers. The vast majority of them were unmarried males under 30 years of age, who tended to remit a large portion of their earnings. They were granted a three-year work visa with a pro forma renewal process (the visas were almost always renewed unless the visa-holder had committed a crime).

BECOMING TEIJUSHIN

After two or three renewals, they were granted the coveted status of permanent resident (teijushin), virtually impossible for other foreigners.  Almost 60 percent of teijushin are Brazilian. With Japan’s foreign-born population at under 2 percent, among the lowest in the world, Brazilians have been the majority share of the migrant worker population since 1990.  In 2000-2004, the number of permanent residents grew 18 percent, from 657,000 to 779,000, but the portion of those who were Brazilian grew by 400 percent.

Over time, many of the men wound up staying, and started or brought over families. The changing profile of the migrant population implied a gradual slackening of per capita remittances.   In 1992, 94 percent of the Brazilians in Japan were of working age (15-64 years old).  By 2002, this figure had fallen to 85 percent diluted by the entry of children and wives, but total remittances continued to rise, buoyed by greater aggregate numbers and the resilient Japanese economy.

RECALCULATIONS NEEDED

A recent survey from the IDB suggested that 70% of Latin Americans in Japan remitted 15 times a year at an average of $600 per transfer, or about $8,700 annually.  These numbers are much more conservative than the figures suggested by the Japan Institute of Labor. 

According to their research, the average monthly remittance in 1993, the first year for which data are available, was US$1,664, which at the time was three times the average monthly income in Brazil (US$623).  By 1998, the monthly remittance had climbed to US$1,848, at that time slightly higher than monthly income in Brazil (US$1,806).  Interpolating at simple rates of growth, that would put the current average monthly remittance in the neighborhood of $2163 per month, or just under $27,000 per year.  

These figures are in line with the savings rates of Japanese households, who put away an average of 30 percent on an income of $54,000 a year.  Moreover, the vast majority of Latin American workers in Japan live in shared housing situations to cut down further on fixed expenses like rent, utilities, and food.

Tricia Juhn is director of the financial services practice of US-based consultancy InfoAmericas.

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