Remittances in the Americas

(Source Article: Brazilian Remittances - InterAmerican Dev. Bank)

Remittances (money sent by expatriates living and working abroad to their home countries) are playing an increasingly important role in finance in the Americas – the total amount of remittances in 2005 to Latin America and the Caribbean regions reached a staggering US$53.6 billion in 2005, almost equaling the $61.6 billion in total FDI in the region. (see FDI flows into Latin America remain the same - ECLAC)

Brazilian immigrants living abroad are pumping as much as $6.4 billion (compared to $15 billion in FDI) annually into the country’s economy – the second highest amount of remittances for a Latin American country; Mexico, the recipient of the largest amount of remittance cash flows, received $20 billion in 2005—an approximately $5 billion increase from 2004. In Mexico, remittances have actually surpassed FDI: FDI in Mexico in 2005 was approximately $17 billion. (see Mexico leads Latin America in attracting FDI - STATE.gov)

Given the growing role of remittances in the region, many banks are beginning to offer products and services that allow remittances to flow more securely and unencumbered than before. As of now, however, the majority of Brazilians living abroad send their remittances via wire-transfer services like Western Union. But in the U.S., Bank of America has been proactive in tailoring its services to Hispanics who wish to send money back home – last year the bank launched a free nationwide remittance program. (see BoA announces free nationwide remittance program - prnewswire.com)

While this, ultimately, has meant more cash flows into the countries receiving them, officials encourage the region to try to attract more FDI—a type of investment that has seen stagnant to little growth. Comparatively, remittances to Mexico have increased yearly since 1960, when they amounted to just $84 million. (see US, Mexico deepen economic ties - Dallasfed.org)

In the US, remittances have been criticized by some observers as detrimental to the US economy (in that it's money that could be spent here); are remittances a less efficient and productive route for cash flows to developing countries in Latin America than, say, FDI?