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. Last Updated: 07/27/2016

Latin Americans Repatriate $38Bln

LIMA, Peru -- Latin American and Caribbean workers sent a record $38 billion in remittances to their families back home in 2003, but the Inter-American Development Bank urged financial institutions Saturday to slash transfer costs so that poor recipients get more money.

Workers in the United States were the biggest contributors with $31 billion, followed by Japan with $3 billion.

Remittances outstripped both foreign direct investment and official aid to Latin America together and have been rising steadily since officials started tracking the numbers around five years ago. Remittances were $32 billion in 2002.

"Most of the growth comes from increase in volume and some of that in improved reporting," said Donald Terry, who heads the Multilateral Investment Fund, the IADB's arm that lends to the private sector.

Mexico, which received $13.2 billion, and Brazil, $5.2 billion, were the biggest beneficiaries in the region.

Terry told a news conference on the sidelines of the IADB annual meeting in Lima that even though officials were doing a "better job of counting" the amounts, the actual numbers are probably "somewhat higher," in the order of $40 billion to $42 billion.

Mass migration worldwide in the 1990s is fueling remittances everywhere as immigrants seek higher-paying jobs in rich countries and support relatives back home. Globally, around $150 billion cross borders every year, according to Terry.

But officials are getting a better understanding of remittances by studying the 38.8 million Hispanic community in the United States, the biggest contributor to the phenomenon.

Sergio Bendixen, who heads a polling firm that does field work for the IADB, estimates that around 10 million Latinos regularly send remittances to their relatives. Seventy-eight percent of them use wire transfer companies like Western Union and MoneyGram, which tend to be pricier than banks.

The high cost of sending money overseas keeps billions of dollars from needy families in Latin America, the IADB warned. The fight against poverty and social inequality is one of the themes of the meeting.

The average cost of sending $200 from the United States to Latin America was 7.9 percent, the IADB study showed. Ecuador was the cheapest, at 5.4 percent, and Cuba the most expensive, at 12.1 percent.

Even though the cost is half of what it was five years ago, officials say it must be cut more.

U.S. Treasury Secretary John Snow told a congressional panel Thursday that the United States was working with the G-7 partners to identify regulatory and physical barriers that keep costs high.

One problem, the Bendixen survey showed, is that only 8 percent of Hispanics use banks to transfer funds, which tend to be cheaper than wire transfer companies.

To increase financial awareness among Latin Americans, the IADB will work with 22 "stakeholders" in the remittance process -- mostly financial institutions from Visa International to Western Union -- to cut the average cost of remittances by half by 2010 and increase by 50 percent the number of families receiving remittances through the financial system.