All in the Family - Latin America's Most Important International Financial Flow

This paper is a report of a special task force established by the Inter-American Dialogue to identify and analyze the policy challenges that large and growing remittance flows pose for Latin American and Caribbean governments, the U.S. government, and the international financial institutions.

The paper identifies the factors for the significance of remittances to the people of Latin America/Caribbean:

• The amount of money involved;
• The remarkable stability of the flows over time;
• Their direct and positive impact on social equity in nations with huge income and wealth disparities;
• The fact that they create no future financial obligations.

Further, the paper states that having expanded from about US $10 billion a year in 1996 to US $32 billion last year, remittances:

• Are now Latin America's most important resource;
• Contribute to economic growth, job creation, and poverty alleviation.

The paper reviews the challenges and opportunities that remittances represent, exploring the policy choices available to governments and international institutions. It offers recommendations for policy and action:

• Governments should not control the amounts or restrict the destination of remittances, nor should they seek collect taxes on remittance transfers;
• Governments should continue their efforts to reduce the proportion that fees take out of remittances by promoting competition in the remittance market and encouraging immigrants to use formal financial channels;
• Efforts should be made to encourage remittance senders and recipients to make use of banks and other financial institutions to exploit the full range of economic opportunities they offer.