Booming Brazil now has Latin America’s lowest rate of remittances compared with its GDP.
BY LBC STAFF
If low remittances as a percent of GDP can be seen as an indicator of prosperity, Brazil now holds the top spot in Latin America, according to a Latin Business Chronicle analysis of data from the Inter-American Development Bank and the International Monetary Fund.
Brazil last year received $4.0 billion in remittances, the IDB says. That was a 14.8 percent fall from 2009. “Brazil registered the biggest drop… largely attributable to its continued strong economic performance, which has given Brazilian migrants a powerful incentive to return home,” the bank said in a statement on the remittance results.
The Brazilian economy last year grew by 7.5 percent, its best performance in 25 years. That in turn helped catapult Brazil into the fifth-largest economy worldwide, according to Goldman Sachs. When Brazil’s remittances in 2010 are measured with its GDP, Latin America’s largest, they only accounted for a mere 0.2 percent. No other Latin American country had as low a rate.
Mexico, which has Latin America’s highest remittances, received $21.3 billion last year, an increase of 0.7 percent, according to the IDB. That translated into 2.1 percent of its GDP, the second-largest in Latin America.
Apart from Brazil, Argentina, Venezuela and Uruguay also have low remittances rates compared with their economies: 0.3 percent in all three cases.
Haiti, Latin America’s poorest country, had the highest rate – a whopping 30.3 percent of its economy. Last year, Haitians abroad sent home $1.97 billion, which was a 20.1 percent increase compared with 2009. “Haiti saw the sharpest increase in the region …as its Diaspora responded to the humanitarian crisis caused by last year’s earthquake,” the IDB says.
Chile, which also suffered a earthquake in 2010, saw the second-highest increase in remittances in Latin America last year: 8.5 percent.
Meanwhile, four of the five countries of Central America account for the highest remittance rates outside of Haiti. They include Honduras (16.5 percent), El Salvador (16.2 percent), Nicaragua (15.2 percent) and Guatemala (10.1 percent). “Money transfers to Central America recovered 3.1 percent, as migrants’ employment and earnings prospects improved in the United States,” the IDB says.
Colombia, which received Latin America’s third-highest amount of remittances last year, saw those transfers account for 1.4 percent of its GDP. Last year, remittances fell by 2.7 percent in Colombia to $4.0 billion. Also neighboring countries like Ecuador and Peru posted declines. “Remittances to Andean countries fell 4.1 percent, reflecting the prolonged economic malaise in European nations where many of their expatriates reside,” the IDB says.
All in all, Latin America and the Caribbean received remittances of $58.9 billion in 2010, a 0.1 percent increase from 2009, the IDB reports. That translated into 1.2 percent of Latin America’s economy, according to the Latin Business Chronicle analysis. That was a decline from the 1.5 percent rate in 2009 and the 1.6 percent rate in 2008.
The small increase came after a sharp drop in 2009. Meanwhile, a combination of inflation and currency appreciations compared to the US dollar weakened the value for the recipients, the IDB points out.
“The value of remittances to Latin America and the Caribbean was strongly affected by the appreciation of most local currencies against the U.S. dollar and the euro during 2010,” the bank says.
On a weighted average, money transfers to this region were worth 4.4 percent less than in 2009 due to currency fluctuations, but in some countries the effect was even more pronounced, it points out. In Brazil, for example, the decrease was 22.3 percent when taking into account the appreciation of the real.
“Rising inflation further eroded the purchasing power of money transfers in many countries in the region,” the bank adds.
Expressed in local currencies and adjusted for inflation, remittances to Latin America and the Caribbean were 8.7 percent lower in 2010 than in 2009.
This year, remittances are expected to grow again, but at lower than the double-digit rates before the 2009 global crisis, the IDB predicts.
“Remittances remain a vital source of income for millions of families in the region who depend on these flows to cover the cost of basic needs such as clothing, medicine or food,” the bank says.
© Copyright Latin Business Chronicle
2010 figures in millions of US dollars.
© Copyright Latin Business Chronicle