Remittances in Times of Financial Instability: Impact of the Financial Crisis on Remittances to Latin America and the Caribbean

This document examines remittance flows to Latin America and the Caribbean (LAC) in 2008, with a special focus on the impact of the financial crisis.

The global financial crisis brought with it a new set of challenges for migrant workers and the contributions they make to their families back home. The study reveals that:

• Remittances declined in the fourth quarter of 2008 for the first time since 2000;
• Decline was fuelled by a negative immigration climate, rising food and fuel inflation and the appreciation of local currencies against the dollar;
• Dollar soon appreciated, however, and migrant workers responded by sending more money home;
• Number of dollars sent home continued to decline, but the value of these dollars in local currency terms increased;
• Percentage of remittances that is used to save or invest is now being used for current consumption.

The paper predicts a decline in overall remittance flows to LAC in 2009. The degree of decline will depend on the severity of the financial crisis and the ability of migrant workers, their work sectors and their home economies to weather the storm.