Less money, barrels sent back home
Caribbean economies, already walloped by high energy costs and a tourism slump, are now confronted with a new challenge- the prospect of remittances drying up in the wake of severe global recession.
Remittances – money sent back home to relatives – have helped Latin American and Caribbean governments struggling to create jobs and eradicate poverty.
Remittances amounted to over $62.3 billion in 2006 and $72 billion in 2007 (which are the latest available figures) and were projected to grow to over $100 billion next year.
This is not likely to happen given the prevailing economic conditions in the United States and the United Kingdom where companies are failing and record numbers of workers are losing their jobs.
Immigrants – and a good portion of them are illegal- are also adversely affected and reports are that many of them will be returning home.
This will put pressure on Caribbean economies, particularly those like Jamaica, Haiti, the Dominican Republic, Guyana, Grenada, St Vincent and the Grenadines and others which suffer from high unemployment and which saw these remittances as a godsend.
The Inter American Bank (IDB), in a 2006 report, noted that Jamaicans and Guyanese living in the U.S. and the U.K. repatriated some US $1.9 billion.
Trinidad and Tobago nationals sent back some US $97 billion home.
Remittances which apart from assisting poverty stricken families and the unemployed represent much-needed foreign exchange inflows.
These repatriated funds are key players in the Gross Domestic Product (GDP) of these countries: in Jamaica remittances account for 19 per cent of GDP, Guyana for a whopping 34.3 per cent in Haiti for 24.1 per cent and in the Dominican Republic for 9.3 per cent.
In the case of Trinidad and Tobago, however, which has a GDP of over US $19 billion (TT $115 billion), remittances account for only 0.7 per cent.
The IDP report noted that Caribbean migrant workers lived on the margins and remittances are” widely recognised as critical to the survival of millions of individual families, and the health of many national economies throughout Latin America and the Caribbean.”
With the economic situation worsening in the United States,surely there will be less and less money to send back home.
Mexico, the single largest beneficiary of remittances, has already seen a decline. Last year remittances dropped from the 2007 figure of $26 billion to some $25 billion .This was a 3.6 per cent decline and it was the first time on record that this has occurred.
Remittances happen to be Mexico’s second largest source of foreign income, oil being the first and the decline represents a trend not only through the hemisphere but world wide.
Global remittances are expected to drop by at least one per cent in 2009, according to World Bank economist Dilip Ratha.
Robert Meins of the IDB stressed:
“Remittances are the single strongest poverty-reduction tool that many countries have. This could translate into a great deal of hardship for a lot of people, which I think is under appreciated.”
The barrel trade, which go hand in hand with remittances, will also take a hit which means less foodstuff , clothing and household articles for impoverished households.