Remittances Also Benefit the United States

Remittances Also Benefit the United States

Tucson, Arizona – The billions of dollars in remittances sent abroad annually from the United States not only benefit the economy of the receiving countries, but also the economic development of the United States, according to a study released last week.

The report of the Immigration Policy Center (IPC) concluded that the money sent abroad helps to boost the exportation of American products to countries like Mexico, one of the main destinations of remittances from the United States.

“Many people believe that remittances are a money drain for the host country; they feel that it is a loss of domestic dollars because this money is not being spent here in the United States,” Kristin Johnson, author of the study and professor of political science at the University of Rhode Island said during a telephone press conference last week.

According to the World Bank, $397 billion in remittances were transferred throughout the world in 2008, with the United States being the source of about $100 billion of remittance funds.

Johnson pointed out that it is well-known that remittances facilitate development of the financial architecture, increase the purchasing power of low-income families to acquire goods and services and provide sources of micro-financing for people to start their own businesses.

She added that there is evidence that remittances provide long-term benefits to the US economy by boosting the consumption of domestic products as a result of business expansion, an important aspect to maintaining economic health and stability. Johnson showed that border states such as California saw an increase of exports to Mexico by 14 percent from 2007 to 2008. Arizona reported an increase of 12.9 percent and Texas logged in with a 10.9 percent increase during the same period.

Johnson noted that studies have shown that remittances have a significant impact on the economies of Mexico’s southern states, where 80 percent of the funds sent from the United States go directly towards buying food, clothing and other items.

“Increasing purchasing power of families in countries like Mexico increases the demand for and capability of foreigners to purchase US exports,” Johnson said.

The report highlighted one important role that immigration plays in supporting the US economy: immigrants living in the United States become accustomed to consuming and using certain types of US products that they continue to purchase and consume upon returning to their nations of origin.

Mexico is one of the largest buyers of textiles and sweets produced in the United States, industries which generate more than $3 billion annually in exports.

The study also revealed that between 2004 and 2008 exportations of alcohol from the United States and Mexico increased by 334 percent, while the exportation of sporting goods, toys and games grew by 492 percent.

Johnson said that it is not surprising that the 15 US states with the highest percentage of foreign residents and citizens provide for 53 percent of total US exports.

She said that owing to the economic crisis it is expected that remittances to Mexico will fall between 9 and 10 percent in the near future. In 2009, remittances sent from Mexicans living in the United States dropped 15.7 percent from the 2008 level, according to the Bank of Mexico, a statistic that indicates that in hard times immigrants tend to consume locally first and then send remittances to their families.

Translation: Ryan Croken.

Ryan Croken is a freelance writer and editor based in Chicago. His essays and book reviews have appeared in The Philadelphia Inquirer, Z Magazine and ReligionDispatches.org. He can be reached at ryan.croken@gmail.com.