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In When Giants Fall, I highlighted a May 2008 VoxEU.org
column by Drew Keeling in
which he argued that "the economic risks of working abroad, particularly
the risk of cyclical recessions, and the availability of family networks to
help cope with those risks, were crucial factors determining who migrated and
how they migrated."
In other words, once
the economic tide reversed course, it was a good bet that immigration
patterns would follow suit.
As it happens, an
article published in the Wall Street Journal earlier this month, "The Great U-Turn," noted that "global
migration flows reverse for the first time since the Depression as work in
the rich world dries up."
Well, it appears that
it is not just cross-border human traffic that is changing direction. In "Immigrants Who Wired Their Wages Home Are Now Asking Their
Families to Send them Money," the Associated Press
reports that cross-border money flows are also being affected.
For five years,
immigrant day laborer Leo Chamale wired money twice a month from New Jersey to his family in Guatemala. Recently, he stepped up to the money transfer window
for a different purpose -- to ask that his family send some of his savings
back to him.
"I hadn't worked
for five months, and I was two months behind on rent, so I had them send
$1,500," the 21-year-old Chamale said in Spanish. "My mother said,
`That's a lot of money!'"
With the U.S. economy in a ditch, money transfer agencies have been reporting a decline in the wages
immigrants are sending back to their home countries. Now, it appears some
immigrants are going a step further -- asking their relatives to wire them
money back.
"We've never
seen this before," said Marlen Miranda, manager of Peerless Travel in Fairview, which runs a money transfer service. "I mean, one or two people might
receive money for a special reason, but not this quantity of people."
Miranda said she has
seen her customer base dwindle from 200 people to 75 who regularly use her
money transfer services each month. Of those 75, Miranda said, about 20 now
come in to receive money instead of sending it home.
"They can't send
them much, because the economy in their countries is so bad," Miranda
said. "Sometimes people only receive $20 from home."
It is not clear how
much money is being sent back to the U.S. or how widespread the phenomenon
is. Large money transfer agencies, such as Western Union, said they do not
disclose how much money is sent or received by their field offices. Banks in
foreign countries often track only money sent into the country by their
citizens living abroad.
But clearly, these
"reverse remittances" -- as the money wired back to the U.S. is called -- are extremely small when compared to the money immigrants send home.
Immigrants working in
the U.S. sent more than $50 billion back to their native countries last year,
according to the World Bank, which predicts the amount will drop 5 percent in
2009. Mexico's central bank said remittances sent to that country are down
more than 18 percent in the past year, and registered their biggest decline
on record in April.
Alejandro Tejada,
manager of Tenares Communications, a Western Union office in Passaic, said
he, too, has noticed money flowing in reverse, into the U.S. -- a phenomenon
he rarely, if ever, saw before.
It began around late
March, Tejada said, after a tough winter in which construction projects and
other ventures that usually employ immigrant day laborers ground to a halt.
World Bank economist
Dilip Ratha said he devised his own measure of how much money is sent back to
immigrants living in the U.S. and other countries. Analyzing foreign currency
deposits in the Dominican Republic, Mexico and India from February 2008 to January
2009, Ratha found that immigrants from those countries tapped into their
savings accounts -- money they had previously wired home -- at an accelerated
rate as the global economy worsened.
The amount of foreign
currency on deposit declined 7 percent in the Dominican Republic, 12 percent
in India, and 6 percent in Mexico during the 12-month period, Ratha said.
Nevertheless,
"people are sending far, far, far more back home than what they are
taking out," he said.
Ratha said the surge
in money wired back to the U.S. will not last long.
"The ability of,
let's say, a Mexican family or a Nepalese family to be able to send dollar
remittances to maintain somebody to pay for living expenses in the U.S. or in
Europe is very weak, because they are very poor," Ratha said. "And
the savings that are there of the migrants are also not very significant in
most cases -- so those savings will run out very quickly."
Standing on a street
corner a recent morning in Palisades Park, looking for work, Chamale said he
is now hoping to earn just enough for a plane ticket home.
"I was forced to ask for
money from home during the winter months," he said. "After that, I
said to myself, `That's it -- I'm heading back to my country.'"
Michael J. Panzner
Editor, Financialarmageddon.com
Also
by Michael J. Panzner
Michael J. Panzner is a
25-year veteran of the global stock, bond, and currency markets and the
author of Financial Armageddon: Protecting Your Future from Four Impending
Catastrophes, published by Kaplan Publishing.
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