For many immigrants from developing countries in particular from south America, Africa and Asia, living and working in America is a dream come true, most of the immigrants move to America ‘the land of opportunity’ with the objective of staying either permanently or get enough resources to invest back home so that they can go back to a cozy and comfortable life. Whether immigrants come to America permanently or otherwise many if not all live behind families and relatives who expect financial support Therefore forcing immigrants to work extra hard in order to meet this responsibilities.

However, given the latest trend and economic hardship, the American dream is a concept that might soon be untenable. A good example of immigrants in the public limelight with these regard is the Latino immigrants from South American Hispanic countries. Given the large number of Latino immigrants in America, remittances back home was a phenomenon that was largely ignored until the year 2000.

According to inter-American development bank multilateral investment fund MIF (2006), the monies sent back home by Latino’s immigrant was “hidden in the plain view” and treated as insignificant, in their books this transactions were subjects of errors in their financial columns. In the wake of the millennium, the volume of transaction, amount transferred and costs raised concerned and prompted the bank to intensely analyze remittances and effect policies that will facilitate and promote remittances as a community development and redistribution of resources mechanism.

According to MIF (2005), about 22 million Latino’s immigrants in North America, Europe and Japan have exported labor services and in return remit part of their proceeds back home for one reason and the other therefore, the significance and impact of this remittances cannot be ignored. Problem statement. This paper is an in-depth evaluation of the reason for and impact of remittances by Latino immigrants back home and the recent decline of remittances by the immigrants in an attempt to show the impact of remittances and highlight factors that inhibit remittance of money by Latino immigrants back home.

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Impact and reasons why Latino immigrants send money back home. As mentioned most of the Latino families move to the United States for purely economic reason, in addition the mutual benefiting economic relationship is one of the most fundamental reason and driver of remittances back home. The truth is that most developed countries need the cheap services offered by the immigrants and the immigrants need the money thus the economic principle of willing buyer willing seller plays a big role in facilitating and promoting remittance back home due to increased labor mobility (Vanconcelos, 2005).

According to MIF (2006), United States labor market would have contracted by a third in all sectors if immigrants did not offer their services in the 1990’s. Immigrants move from their home country to seek a better life in America and America benefits from the fact that this translates to importation of the much needed manpower thus facilitating and promoting remittances A survey by MIF in (April 30th 2008 survey report, pg. ) showed that most immigrants secured a job within the first month and the average monthly income for the first job was $900 which is six times the income back home ( according to MIF (2008 pg. 6, the average monthly income in Hispanic countries s $160 a month). Therefore, given the wage differential and economic status in immigrant’s home country and America, a small proportion of their income remitted to the home country is significant with regards to household expenditure thus improving the economic condition of their family back home.

This means that sending a few hundred dollars back home has a major impact on the welfare of the people back home since in this countries life is relatively cheap. Surveys show that in 2003 there were over 12 million immigrants from Latin America and the Caribbean and 60% of this population remitted money to their families back home on a regular basis amounting to around $35 billion annually. In addition, 2006 reports recorded an increase in the proportion of immigrants sending money home of 73% amounting to $45 billion annually (Vanconcelos, 2005 & MIF, 2006).

Secondly, most of the immigrants are generally proud of their origin contrary to many people’s belief. According to Rodolfo, Garza & Lowell (2002), though most are dissatisfied with the political and economic management of their respective countries and expressed satisfaction of American economic and political management, Despite of this, immigrants generally have pride and affection for their home country and are interested in contributing to their economic welfare of their country since a large proportion would like to return back to their homeland.

Due to this compassionate connection with the homeland country, a good number of the immigrant invest back home MIF (2006) shows that 52% of the immigrants living and working in America invest in their country with majority expressing interest in owning a family home and a small business store back home, a third of the immigrants said that they have invested in real estate business back home. Remittances have a major impact on poverty alleviation, investment and redistribution of income globally.

MIF (2006) report revealed that in 2001 to 2004, the annual average income of the Latino immigrants amounted to US $500 billion of which approximately 10% is sent back home through direct money transfer and in terms of goods while 90% is spent in America. Therefore, given that a big proportion of the money is spent in America it builds up the purchasing power and contributes to the growth of the country. In addition, the 10% remittance acts as injection to the poor Latino countries thus contributing to development and poverty alleviation in the respective countries.

According to a comment by Said (2006) – a chronicle staff writer – “… emittances are a huge global phenomenon, surpassing $250 billion worldwide every year and far outweighing international foreign aid, according to the World Bank. In many Latin American, Caribbean and African countries, remittances are a key pillar of the gross domestic product. ” Though, the amount seems relatively small in developing countries all over the world, remittances plays a fundamental role and accounts for a significant proportion of foreign reserves and investment in developing countries and thus can have a major impact in those economies in terms of poverty alleviation, investment funds and development.

The injection of these funds in the poor economies creates jobs, improves the infrastructure and generally contributes to the development of the countries thus can be termed as an income distribution mechanism. Moreover, the impact of immigrants economically is positive in the country of origin and in the developed country where immigrants provide labor services and boost effective demand thus contributing to the countries growth of both regions (Vasconcelos, 2005 & Rodolfo, Garza & Lowell 2002) Decline of remittances by Latino Immigrants.

According to recent findings documented in the inter-American development fund survey (2008) where 5000 Latino immigrants were interviewed (47% of the interviewees were illegal immigrants while the rest were American citizens and legal immigrants), there has been a noted decline of remittances among Latino immigrants, as quoted in Preston, 2008, Dr. Terry the general manager of MIF held that “The longstanding pattern of increasing numbers of Latin American immigrants sending increasing amounts of money back home has stopped.

According to the survey, only 50% of the immigrants send money back home a decline compared to 73% recorded in 2006. However, the average amount sent has slightly increased from $300 per remittance to $325 in 2008 accounting for a total average of $45. 4 billion in 2007 which shows stagnation as compared to 2006 and can be interpreted as a decline to the extent that the number of immigrant has significantly increased from the later years to approximately 19 million in 2007. (Preston, 2008 & Bussey, 2008).

Several reasons contribute to the decline but generally, the economic hardship and uncertainty is the fundamental reason that has led to the decline. The following factors influence the recent downturn of remittances. Firstly, governmental policy introduced against immigrants has played a fundamental role in the reduction of remittances. The move by government control illegal immigrant and introduction of penalties to employers who offer jobs to unauthorized immigrants has led to most employers shying way from Latino community and thus affect both legal and illegal immigrant.

This has led to employers discriminating against Latino workers thus contributing directly to reduction of employment among the community (Preston, 2008). In the survey (2008), 61% of legal American citizens and 66% of illegal immigrants felt that discrimination is a big problem a major increase from 2006 where on average only 37% felt that discrimination was a major problem. In addition, the survey revealed that the anti immigrant laws are making it more difficult to send money back home due to increased

However, despite the fact that government policy, the community is adjusting by taking putting in more hours at lower rates in order to make a living, the survey revealed that more than 61% are not ready to leave yet and planning to stay in America and only 17% of the interviewees cited lack of jobs in USA as a reason for moving back home. This means that generally, the amount of income earned on average will reduce given the fact that wage rate among the Latino immigrants might generally go down consequently affecting the amount and frequency of remittances on average and perpetuating the declining trend (Preston, 2008).

Secondly, the recent economic decline in America is a reason that affects fundamentally influence the amount of remittances among the Latino immigrants. Given that, most of the immigrants hold odd jobs and provide manual unskilled labor most of them are low income earners who are worst hit by inflation, and contractionary tendencies in the economy. According to accounts by immigrants the last 18 months have proved difficult in that jobs are scarce, wage rates have reduced and expenditure gone up. One Mexican woman said that she is seriously considering going back home since she just can’t live on $150 a week.

One of the important impacts in the economy today that has led to decline of jobs due to economic downturn is the recent fall in prices in the housing market. The survey reveals that the biggest sector employing immigrants is housing industry (21%) thus the latest events have led to job cuts and reduced wages. Experts argue that with the recent economic problems and uncertainty. Immigrants find it had to send money back home since they do not know what will happen tomorrow (Bussey, 2008 & MIF survey report, 2008).

Thirdly, another important fact that adversely affects remittance is fees and procedural bottlenecks that impede remittance transfer. According to Said (2006) the American banking financial sector and international financial players reacted to remittance positively and this move led to reduction of fees and introduction of faster, cheaper and convenient means of remitting money due to banks and other financial institution introducing services such as wire transfer that increased competition for remittance companies and eventually pulled the costs of remittance down.

However, with introduction of the Patriot act that controlled money laundering, many small remittance firms were affected since banks could not process the transfer and this led to price increase (Said, 2006). Moreover, remittance costs have hidden fees which make the service inefficient, unaffordable and uneconomical. Hidden costs are a dominant feature in remittance firms other than banks which are loosely monitored, given that there is little or no one to advocate for consumers the real cost of sending money is still high given that the amount sent per person is quite low on average.

For example, some services require both the sender and the receiver pay a substantial fee. In another scenario, remittance companies rip off their clients since they do not account for the differential exchange rate between two countries for example, in a study in Mexico, wire transfer was offering 9 Mexican pesos per dollar while the market exchange rate was approximately 10. 1 Mexican pesos per dollar thus making approximately 110 Mexican pesos per every $1000 sent unfairly. (Said, 2006 & Rodolfo, Garza & Lowell 2002).

Conclusion. In conclusion, sending money back home is mostly driven by the immigrants need to provide for their family back home and invest in their country for personal gratification and the need to contribute positively in the growth and development of the country. Given the difference in income earning ability between poor country and rich developed country the insignificant amount per person sent back home has a huge impact in curbing poverty and welfare of the immigrant’s dependant back home.

Secondly, the urge by a significant proportion to return back home is another reason making immigrants in America send money back home for the purpose of making personal investment and provide for their later years. The impact of remittances worldwide has in recent years become clear, as mentioned in most of the poor countries in South America, Africa and Asia, remittance is of significant importance as an economic driver for growth and development.

Moreover, remittance acts as a global income redistribution mechanism and result in benefiting both countries in that, the poor countries get funds foreign reserves needed for international trade and at the same time it acts as capital injection in these countries. On the other hand, immigrants provide the much needed labor and services and boost effective demand in the country of settlement thus facilitating growth. Lastly, economic hardship and government anti –immigration policies are the most influential factors leading to decreased remittance by the Latino immigrants in the recent years.

Given the strict anti immigrant laws, immigrants find it hard to secure a job and remit money this problem is compounded by the fact that economic hardship has led to increased expenditure while the income shrinks thus making it difficult for the majority of low income earning immigrants to spare enough to send home. In addition, remittance fee make it uneconomical and expensive for immigrants to send money back home thus contributes to the decline of remittance. In my opinion, though, it is necessary to control immigration in the country, the importance of remittance as a resource distributing mechanism is important.

Policies should be enacted to ensure that legal and economic hardships are reduced. It is far much better for mechanism to be put in place to enhance labor mobility within countries-since it will lead to economic development and investment- rather than leave poor countries to languish in poverty and offer them aid. Therefore, government and other stakeholders should encourage inter-country jobs opportunity thereby reducing illegal immigration and enhancing remittance as a global income redistribution mechanism with the aim of achieving balanced growth in the world.


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