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November 2002, Volume 9, Number 11

Latin America

In six Latin American countries-- Haiti, Nicaragua, El Salvador, Jamaica, Ecuador and the Dominican Republic--remittances were 10 percent or more of GDP in 2001. According to the IMF, Mexico received $9.3 billion in remittances in 2001, followed by Brazil with $2.6 billion.

McKinsey estimated that migrants in North America and Europe remit $60 billion a year to their countries of origin, and put the "high margins" in the remittance business at six to 15 percent for the transaction, plus an exchange rate margin of three to five percent, an average of 20 percent of the amount transmitted. Transfer companies have expenses, but McKinsey estimates their profits to be 12 percent of their revenues or, in the case of Mexico, McKinsey estimates that $7.3 billion was remitted in 2001, money transfer fees were $1.5 billion, and money transfer profits were $168 billion. Remittances to El Salvador and Dominican Republic were estimated to be $1.7 billion each.

McKinsey estimates that remitting agents collected about $12 billion in fees in 2001, 20 percent of total remittances.

Competition is lowering fees. US Citibank offers an electronic-fund-transfer service to credit union cooperatives in 40 countries that belong to the International Remittance Network. It enables credit union members who have migrated to the U.S. to transfer money to local Citibank branches in El Salvador, Guatemala and Mexico for $6.50 per transaction.

The Guatemalan Foreign Ministry reported that there were 1.2 million Guatemalans in the US, and that 60 percent were unauthorized. Guatemala received $944 million in remittances between January and August 2002; tourism generated $400 million in the same period.

Caribbean. Over 160 Dominicans were apprehended in Puerto Rico in October 2002 after crossing the Mona Passage, suggesting a sharp increase from the 835 apprehended in FY01 and the 1,951 in FY00.

The Organization of Eastern Caribbean States agreed to an economic union that allows the free circulation of goods and services beginning January 2003, and the free movement of labor by December 2007. The eight countries--Antigua-Barbuda, Dominica, Grenada, St Lucia, St Vincent, Montserrat, St Kitts-Nevis and the British Virgin Islands, have 450,000 residents. Their economies are based on agriculture (mainly bananas), tourism and offshore financial services.

Antigua expressed reservations about the free movement of labor, noting that 30 percent of its workers were from other countries.

Brazil. Luiz Inacio Lula da Silva, leader of the Workers' Party, looked set to be elected president of Brazil in the October 27, 2002 run-off election in which 115 million Brazilians were eligible to vote. Brazil, with 175 million residents, accounts for 40 percent of Latin America's GDP and has been suffering economically. The International Monetary Fund made an emergency $30 billion loan to stabilize the economy earlier in 2002; Brazil has $260 billion in public debt, equal to almost half of Brazil's GDP.

Lula is opposed to the so-called "Washington consensus" economic policy for developing countries-- free trade, strict monetary policy and privatization. During the 1990s, Brazil opened itself to trade, curbed inflation, and privatized, but unemployment and crime rose, and there is enormous pressure for a quick fix to create jobs.

Brazil's most populous and prosperous state is Sao Paulo, with 38 million residents: if Sao Paulo were independent, its population and gross domestic product would surpass those of Argentina and Colombia, the second largest South American economies. Metropolitan Sao Paulo has had "the fastest long-term rate of big-city growth in human experience," growing from 31,000 in 1870 to 18 million in 2002. According to the UN, Sao Paulo is the third-largest urban area in the world, after Tokyo and Mexico City.

Large-scale immigration to Brazil and Sao Paulo began in 1888, when slavery was abolished. Sao Paulo in 2002 has more people of Japanese descent than any city outside Japan, more people of Syrian-Lebanese descent than any city outside the Middle East and more people of Italian descent than any city outside Italy.