Spurring development co-operation - Mexican migrants and collective remittances

CONTENTS

About the Author

Declaration

Tables, Figures and Boxes

Abbreviations

Glossary

Abstract

Chapter 1: Introduction
1.1 Overview
1.2. Methodology
1.3 Chapter Structure

Chapter 2: The International Context
2.1. Introduction
2.2. Migration
2.2.1 Historical Background, Root Causes and Migratory Trends
2.2.2 Effects of Emigration on Developing Countries
2.3. Remittances
2.3.1 Macro-economic Importance of Remittances
2.3.2 Remittance-promotion Programmes
2.4. Related Concepts
2.4.1 Civil Society
2.4.2 Social Capital
2.5. Conclusions

Chapter 3: The Mexican Context
3.1. Introduction
3.2. Background Information on Mexico
3.2.1 General Information
3.2.2 20th Century History of Emigration to the US
3.3. Remittances
3.3.1 Macro-economic Importance of Remittances
3.3.2 Family Remittances, Collective Remittances and Productive Investments
3.4. Government Outreach Programmes
3.4.1 “Program for Mexican Communities Living Abroad” and its Developments
3.4.2 Fund-matching Schemes
3.5 Mexican Hometown Associations in the USA
3.6 Conclusions

Chapter 4: Case Study: 3-For-1 Fund-Matching Scheme
4.1 Introduction
4.2 Background Information on Zacatecas
4.3 Programme Analysis
4.3.1 Projects
4.3.2 Successes
4.3.3 Shortcomings
4.3.4 Policy Recommendations
4.4 Conclusions

Chapter 5: Conclusions and Recommendations
5.1 Introduction
5.2 Migrants as Actors of Change
5.2.1 Development
5.2.2 Politics and Institutions
5.3 Recommendations for Further Research and Actions
Appendices
Appendix 2.1: Effects of Emigration on Selected Developing Countries
Appendix 3.1: Map of the Federal States of Mexico
Appendix 3.2: Typology of Remittances
Appendix 4.1: Map of Zacatecas
Appendix 4.2: Typology of Popular Participation

Bibliography

TABLES, FIGURES AND BOXES

TABLES

Table 2.1: Determinants for Economic and Non-economic International Migration

Table 2.2: Global Income Disparity (1913-1997)

Table 3.1: Mexican Remittance Inflows Compared to GDP, Exports, ODA and FDI

Table 3.2: Impact of Remittances on the Economies of Selected Latin American Countries

Table 3.3: Uses of Collective Remittances

Table 4.1: Sectoral Distribution of Projects

Table 4.2: Cost Distribution of Selected Projects

FIGURES

Figure 2.1: Educational Attainment of US Immigrants (1990)

Figure 2.2: Total Remittances to Developing Countries (1988-1999)

Figure 2.3: Remittances to Major Recipient Countries (2000)

Figure 2.4: Remittances According to Regions (2002)

Figure 3.1: Mexican Emigration to the US (1911-2000)

Figure 3.2: Remittance Inflows in Selected Latin American Countries (1990-2002)

Figure 3.3: Players in the Transfer of Remittances

BOXES

Box 2.1: Investment of Colombian Migrants in Colombia

Box 2.2: The Four Stages of Migration

Box 2.3: Andean Migrant Associations in Lima, Peru

Box 4.1: ECLAC Recommendations

ABBREVIATIONS

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GLOSSARY

Encomendero An individual who delivers remittances personally to a recipient living in the migrant’s home country for a fee.

Hometown Association Migrant association with a trans-local focus.

Maquiladora Factory in which labour-intense goods are produced for export on a value-added basis.

The term stems from the word maquila, which used to refer to the portion of grain, flour or oil that a miller received for his work.

Migradollars See “remittances”.

Used in a US-American context.

Synonymous with migradólares, its Spanish equivalent.

Remittances Money that a migrant earns abroad and then sends back to his or her country of origin. Usually divided into two main categories: family remittances and collective remittances.

ABOUT THE AUTHOR

Before studying this M.A. Programme in International Relations, Iris Schönauer worked for several years as a translator and project co-ordinator. Iris received her degree as Certified Translator for Spanish and English from the Institute for Foreign Languages and Background Studies in Erlangen/Germany in 1998. In order to complement her academic studies, she has frequently visited Latin America for work and travel purposes. Furthermore, Iris can draw on her experience as a civil servant with the German government, a position held between 1985 and 1992. Doing voluntary work for numerous non-governmental organisations also proved to be a very rewarding experience.

During this M.A. Programme, Iris has started to work as a free-lance translator. She is now interested in expanding her field of activities by including tasks which are related to the area of international relations.

Iris can be contacted at iris@suyana.de.

ABSTRACT

In times of rising inequality levels coupled with the fact that many governments of the developing world fail to provide even the most basic public services to their citizens and that neither aid nor trade have so far succeeded in spreading wealth more evenly across the globe, complementary innovative approaches need to be devised that benefit ordinary people.

A myriad of root causes have resulted in ever-increasing international migration and, thus, in rising flows of remittances, which have already overtaken the worldwide amount of official development assistance. Whereas family remittances tend to be part of the recipient’s survival strategy, collective remittances may aim at regional development. Yet not only due to their rather modest share of total remittances but also because of the complexities of regional development itself, collective remittances will certainly not be a “magic wand”. They may, however, make a potentially far-reaching contribution both with regard to low-scale development and popular participation.

This dissertation explores so-called “fund-matching schemes” in which the Mexican government provides additional financial resources for each dollar remitted by migrants as collective remittances. The increased pool of resources enables the implementation of a larger number of projects or of more resource-intense projects for which the improvement of the local infrastructure and human development are currently prioritised. Furthermore, an interesting co-operation between migrants and the state emerges, which - although it shows some remnants of a traditionally authoritarian regime and isolated little cooperative attitudes among migrants - may positively influence Mexico’s political culture in the long run… if handled constructively.

CHAPTER 1: INTRODUCTION

1.1 Overview

The main objective of this dissertation is to investigate the two-fold potential of collective remittances: Firstly, collective remittances may contribute to regional development and, secondly, they may initiate and spur a development co-operation between migrants and their home government. I argue that collective remittances make a contribution to low-scale regional development with regard to infrastructure improvement and human development, which may, in turn, help level the ground for future economic development. Furthermore, I will prove that collective remittances provide an incentive for home governments to establish contacts with émigrés, which may trigger collaborative efforts to tackle an issue of common concern: regional underdevelopment. The quality of such a co-operation, however, depends heavily on the attitude adopted by all parties involved. Those two main research areas will be embedded in a broader discussion about international migration and the importance of remittances for developing countries in macro-economic terms as well as of family remittances for their respective recipients as income-complementing resource or even as sole income.

Migrant remittances are defined as money earned by migrants abroad that is then sent back to their countries of origin. They can be divided into two main categories: family remittances and collective remittances. Family remittances are sent by migrants living abroad to their families back home on an individual basis and are mainly used to cover basic living expenses. Despite the fact that family remittances are of pivotal importance not only to recipients but also to migrant-sending countries as a valuable source of foreign exchange, the focus here is on collective remittances. Collective remittances involve an organised pooling of financial resources by migrants. This money can then be used for charity, infrastructure improvements, educational projects and so forth. In recent years, attempts have also been made to establish income-generating programmes which are financed by collective remittances. To date, collective remittances make up only a very small percentage of total remittances. Firstly, family remittances understandably take priority for migrants as they ensure that their own families are cared for in times of hardship and, secondly, collective remittances require a well-organised network of migrants with an agreed focus.

Migrant-sending countries are becoming increasingly aware of the potential impact of both family and collective remittances and this has propelled some governments to offer incentives which aim to increase and channel remittance flows. This has led to an interesting new form of development co-operation between migrants and home governments: so-called “fund- matching schemes” in which governments match collective remittances donated by migrants. Aside from the developmental purposes which this funding supports, the additional positive outcomes include the opening of a collaborative dialogue between home governments and migrants, the appreciation of migrants’ developmental efforts and a focus on migration- specific problems.

My interest in this topic can be traced back to a feeling of discontent with the politicised way international migration is frequently displayed in the media of industrialised countries. The Northern perspective largely ignores somewhat hidden factors influencing migration such as stark global inequalities not only in terms of income levels, but also with regard to opportunities in general. The hope for a better standard of living and a wider array of life choices is the motivation for many potential migrants who finally set out on a journey filled with uncertainties and perils.

Within the body of literature on migration and development, connections between the two rarely feature, aside from general statements about the effects of “brain drain” on developing countries. However, more recent publications as well as anecdotal evidence demonstrate that measures are now being undertaken to tap into the developmental potential which lies in international migration. Initiatives undertaken include the sharing of new experiences and skills through temporary repatriation schemes, the establishment of networks to improve trade and training opportunities back home, the channelling of collective remittances and savings for developmental purposes. Taking into consideration that migrants tend to leave their home country because the conditions make it difficult to lead a decent life, governments of migrant- sending countries have much to gain in establishing a partnership with migrants and bringing about improvements in local conditions. Fund-matching schemes constitute one opportunity which can be exploited.

The insights gained from this study shall provide policy-makers with a basis for understanding the logic behind collective remittances, their inherent potential as well as the complexities involved in establishing a true partnership between migrants and their governments. However, as socio-economic, political and cultural conditions vary from country to country, no general template of policy-making can be offered. This study focuses on Mexico and uses a single heuristic case study as an illustrative example. Analyses of further co-operative schemes from other parts of the world would be recommended in order to gain a broader insight. However, the information provided can be used as a starting point for migrants, governments and organisations to consider initiating new programmes or to improve existing ones. Several reasons induced me to concentrate on the Mexican case: Due to the fact that this study falls into the category of small-scale research, I preferred to elaborate a sufficiently profound analysis of one scheme which can then provide a valuable basis for comparative studies carried out on a larger scale. Additionally, I felt that I could make a more useful contribution to the literature by analysing the Mexican case, as I am more familiar with the Latin American culture and the respective languages than, for example, with Asian or African ones. Within the Latin American context, Mexican fund-matching schemes represent the most advanced collaborative effort between migrants and their government.

1.2. Methodology

The main methodological tools used are document analysis, statistical evidence, lightly structured exploratory interviews carried out via e-mail as well as a case study of the “3-for-1 fund-matching scheme”, which originated in the Mexican federal state of Zacatecas.

The migration and development literature formed the basis of the empirical document analysis and helped me to understand the broader context in which collective remittances are situated. Primary material and interviews permitted an investigation of a co-operative development project at a distance. Although the number of people interviewed is limited, they represent a broad range of perspectives. Those interviewed include: a Central American project director working for a US-American think-tank; a Mexican academic from the University of Zacatecas; a Mexican project secretary of a federation of Zacatecan migrant associations in the United States of America (USA); a local employee of a Mexico City-based US-American philanthropic foundation and a US-American academic who worked as a volunteer for a Mexican income-generating project part-funded by collective remittances.

In Chapter 3 and 4, the following theoretical frameworks will be adapted for our purposes:

1. Typology of remittances (Goldring)
2. Typology of participation (Pretty et al.).

The first typology is extremely useful in understanding both the logic behind each type of remittances and the underlying reasons for current disagreements as to whether collective migrant investments in income-generating projects fall into the category of collective remittances or rather into an investment category. The second typology structured my thoughts when examining the collaborative relationship between migrants and the state, illuminating shortcomings and further potential.

1.3 Chapter Structure

CHAPTER 2 provides the international context of migration and remittances, including information about the historical background of migration, its root causes, current migratory trends and the effects of emigration on developing countries. This is followed by an assessment of the macro-economic importance of remittances for migrant-sending countries, the possibilities for promoting remittance flows and the importance of networks.

CHAPTER 3 focuses on Mexico and its 20th century history as a net exporter of labour. This comprises an analysis of the macro-economic importance of remittances in Mexico and an examination of the various types of remittances, using Goldring’s typology. This chapter also examines government outreach programmes which foster the establishment and maintenance of relations with Mexicans abroad and the origin of fund-matching schemes. Finally, this chapter explores the reasons for the foundation of Mexican hometown associations (HTAs) in the United States of America and their characteristics.

CHAPTER 4 evaluates the 3-for-1 fund-matching scheme which came into being in the Mexican federal state of Zacatecas. Its primary objective is the improvement of the local infrastructure and the provision of other social services. Each dollar donated by migrants is matched by an additional dollar from the federal, state and municipal government respectively, which quadruples collective remittances. Initially, some basic background information about Zacatecas shall contextualise this case study. This is followed by an examination of Zacatecan hometown associations in the USA and a study of the scheme’s projects, successes and shortcomings; some policy recommendations will also be offered.

Pretty et al.’s typology of popular participation is used to structure the analysis of the co- operation between the Mexican state and migrants.

CHAPTER 5 draws conclusions on the migration-development nexus in general. The role of migrants as emerging agents of change will be given special attention, but the importance of the state and other organisations to development co-operation is also explored. Finally, proposals for further research and actions will be provided in order to ensure that policy- makers avail of the best possible information on which to base their decisions and that measures of improvement are put into practice for current schemes.

CHAPTER 2: THE INTERNATIONAL CONTEXT

2.1 Introduction

The objective of this chapter is to provide the necessary international information, which contextualises the country-specific study dealt with in Chapter 3 and 4. This chapter is divided into three main areas: migration, remittances and related concepts. The first section contains information on the historical background of migration, its root causes, current migratory trends and the effects of emigration on developing countries. The remittances section examines the macro-economic importance of remittances for migrant-sending countries and the possibilities for promoting the increase of remittances and their channelling for developmental purposes. Finally, the concepts of civil society and social capital are explained and the role of migrants as well as the importance of networks highlighted.

Examples shall illustrate experiences gained in different parts of the world.

2.2 Migration

2.2.1 Historical Background, Root Causes and Migratory Trends Historical Background of Migration

As Ravenstein stated in 1889, “migration means life and progress, a sedentary population stagnation” (Skeldon, 1997: 19). This quote shows that human migration has always been an integral part of life. People have moved on to new places fleeing from unbearable circumstances or in search of better opportunities. In the 19th and early 20th century, migrants were generally viewed as a resource contributing to the development of both home and host countries. Migration provided an important economic and social safety valve for poorer areas while allowing labour to relocate to areas where it was scarce.¹ During times of rapid industrialisation, regulating migration was not necessary, and the de facto right to emigrate was complemented by a de facto right to immigrate (Nuscheler, 1995). Nowadays, the right to emigrate is laid down in the Universal Declaration of Human Rights, 1948, however, with the exception of the right to seek asylum from persecution, no right to immigrate exists - neither de jure nor de facto.² Industrialised countries increasingly prioritise the protection of their countries over a root-cause approach towards migration. Migrants from developing countries are therefore often seen as “a problem in need of regulation” (Nyberg Sørensen et al.,

2002: 8). Yet stricter immigration legislation hardly impacts on A. O. Hirschman’s emigration theory, which proclaims that people simply show their resistance to existing circumstances through exit (“emigrants vote with their feet”). If main doors are locked, migrants will try back doors, side doors, windows or even the chimney in search of a better life.

Root Causes of Migration

Migrants tend to flee from repression, war, political instability, environmental degradation, poverty or a lack of opportunities. The reasons for their departure and whether their destination is within the borders of their own country or abroad determine if a migrant is classified as an “internally displaced person”, a “refugee” or an “international migrant”.

According to conservative estimates listed in the World Refugee Report of 2002, internal displacement currently affects more than 22 million people³ of which about half takes place in Africa (Niessen, 2002). Farmers constitute a particularly vulnerable group, as they are not only strongly affected by the asymmetries of a more and more global economy, but increasingly also by measures with inherent developmental objectives such as the construction of hydroelectric dams. According to the World Commission on Dams, between 40 and 80 million people have been forced to leave their homes as a result of the construction of dams (Petterson, 2002). Difficulties in collecting reliable data and agreeing widely recognised methods of measuring such migratory phenomena yield very different results, so statistics cited are intended to demonstrate tendencies and not numerical evidence.

Refugees are defined in the United Nations Convention Relating to the Status of Refugees (“Geneva Convention”; 1951) as persons residing outside their country of citizenship who are unwilling or unable to return because of a “well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion”.⁴ Although refugees could also be considered non-economic international migrants, the terms “international migrant” or “migrant” are frequently used to refer exclusively to so-called “economic migrants”. Table 2.1 illustrates the factors influencing the decision of potential economic and non-economic migrants, but they are neither all-encompassing nor mutually exclusive.

Table 2.1: Determinants for Economic and Non-economic International Migration

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Source: Adapted from a model used by Widgren and Martin, 2002

For the purpose of this dissertation, the term “migrant” will refer to an international migrant motivated mainly by factors listed in the five highlighted fields. In the Mexican case, migrants leave for the USA to improve their economic situation (economic supply-push factor) helped by migrant network-based information flows and the geographical advantage of covering a relatively short distance. The possibility of finding illegal or legal work in the US serves as a demand-pull factor. Family reunification is a further incentive for migration; this category accounted for over two-thirds of all permanent immigration into the United States in 2000.⁵ Apart from traditional supply-push factors, it is now increasingly recognised that risk reduction also influences potential migrants (Widgren and Martin, 2002). Examples for such risks, which migrants wish to reduce, are the fear of crop failure or local credit obstacles.

However, by far the strongest influence remain stark global income inequalities and poverty. Nevertheless, the popular conception that the poor are migrating from the South to the North is unfounded because most migration takes place among developing countries.

The poorest of the poor, that is the 1.2 billion people living on less than US$ 1 a day, do not have the connections and resources needed to engage in inter-continental migration. Even the nearly 3 billion people who live on less than US$ 2 a day - and who constitute half of the world’s population - are unlikely to provide the bulk of migrants and international asylum seekers. If migrants originate from poor households, it is most often the most resourceful member of the household who is encouraged to migrate to the North (Nyberg Sørensen et al., 2002: 6).

The Mexican case, however, constitutes an exception due to the country’s geographic proximity to the US and strong migrant networks that facilitate international migration. Yet, generally speaking, for those who are in a position to migrate from developing to industrialised countries, the evolution of global income inequalities illustrated in the following table certainly provides a very good reason to do so.

Table 2.2: Global Income Disparity (1913-1997)

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Sources: UNDP (Hermele, 1997: 146) and Berkeley University website

Migratory Trends

Migration in the 20th century has been characterised by the following phenomena: the European model of narrowing job and income gaps, general tendencies of rising international migration and the “feminisation” of migration.

In the 20th-century European context, the narrowing of job and income gaps between the United States and Europe as well as among European states has often been used as an example to be emulated at a global level in order to reduce migration pressures worldwide. The beginning of the century saw strong migratory flows from Europe to North America until restrictive legislation in the 1920s almost stopped these flows across the Atlantic. In the 1950s and 1960s, when the gap in jobs and incomes narrowed substantially due to strong economic growth in Europe, migration across the Atlantic was considerably reduced even beyond the point when the US re-opened opportunities for Europeans. Similar circumstances help to explain why labour migration from southern European nations, such as Italy and Spain, to northern Europe drastically fell in the 1970s and 1980s. Experience suggests that, after income gaps are narrowed to a ratio of approximately 1:4 and more rapid economic growth in the emigration area creates the widespread expectation that economic convergence will take place in the long run, economically motivated migration practically ceases (Widgren and Martin, 2002). This economic convergence theory will be further discussed in Chapter 5, which touches upon the development-migration nexus in general. Therefore, I will limit its discussion at this point to some thoughts about the practical application of this theory to developing countries: The current developmental distance between most developing and industrialised countries is much greater than outlined in the European context, and the number of developing countries exceeds by far the number of developed countries. Furthermore, the particularly benevolent circumstances leading to Europe’s post-war economic success together with the unprecedented political will especially on the part of the US to promote this success illustrate that equalising measures designed to bring about economic convergence on a global scale require major changes of the current world order and the support of the industrialised world for which only very dim signs are discernible so far.

The rising number of international migrants and the new phenomenon of the “feminisation” of migration deserve a closer look. More than half of the 160 million international migrants⁶ estimated by the United Nations (UN) for 2000 moved between developing countries and not from the South to the North (Widgren and Martin, 2002). The figure for 2002 is at least

185 million people – up from 80 million only three decades ago.⁷ Hence, the number of international migrants is steadily rising although a substantial percentage remains in the South, where already more than 80 per cent of the world’s 6.1 billion people live.⁸ According to Martin and Taylor, most estimates suggest that the number of immigrants, migrant workers, refugees, and asylum seekers living outside their country of citizenship is rising by two to four million annually (Martin and Taylor, 2001: 96). Current trends in both migration policy and practice show that migration increasingly takes on a temporary or circular nature facilitated by decreasing transportation costs and the immigration policies of certain migrant- receiving countries.⁹

A further general trend in the history of male-dominated labour migration is a marked gender- specific change: 47 to 48 per cent of migrants are now women (Niessen, 2002). This new phenomenon raises special concern about the vulnerability of women migrants, as women are more prone to mistreatment by international labour traffickers either by being forced to work in the “entertainment” and prostitution sector or by being exposed to exploitative working conditions in the domestic or other typically female employment sectors.

In the Latin American context, during the last decades of the 20th century, the region transformed from being a region of immigration into a region of emigration with one out of ten of all international migrants being born in a Latin American country. According to the Economic Commission for Latin America and the Caribbean (ECLAC), almost 20 million Latin Americans - including Caribbeans - live outside their country of birth and half of them emigrated during the 1990s. Particularly strong increases are noticeable among Ecuadorians, Argentineans and Brazilians. Due to the weaker attraction of traditional Latin American destinations, intra-regional migration has declined in favour of an unprecedented expansion towards Europe and traditionally strong emigration flows towards the USA. Between 1990 and 2000, the number of Latin America-born immigrants in the USA rose to 15 million, which constitutes more than half of all US immigrants.¹⁰ Furthermore, illegal and temporary immigration from Latin America to the US tends to be substantial. The general trend of the feminisation of migration, however, has still a rather weak impact on Latin American immigration to the US, which is mainly due to the fact that continuing high numbers of male Mexicans strongly influence this outcome. In terms of educational levels, Latin Americans¹¹ lag behind other US immigrants (see Figure 2.1).¹²

Figure 2.1: Educational Attainment of US Immigrants (1990)

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Source: Adapted from Carrington, W. J. and E. Detragiache (1998)

Despite the large outflow of the highly educated from Asia, its “brain drain” - which will be discussed in more detail in the next section - is small in comparison to Latin America due to Asia’s generally elevated percentage of highly educated people.

2.2.2 Effects of Emigration on Developing Countries

Emigration entails both positive and negative effects for developing countries. Among the positive effects are remittances, the investment of financial and human capital by return migrants and the relief of the frequently strained labour markets (Nuscheler, 2000). “Brain drain” and some potentially detrimental aspects of remittances are among the negative ones. Appendix 2.1 contains a brief list of results obtained from comparative studies undertaken in three different countries, which demonstrate that Pakistan, Turkey and South/Southeast Asia generally experienced the positive impact of remittances and an easing of the labour market, but very little or no positive impact from return migration.

Positive Effects

Officially registered remittances¹³ to developing countries - comprising family and collective remittances - have more than doubled between 1988 and 1999 and were estimated at over US$ 65 billion¹⁴ in 1999, which means they were 20 per cent higher than the official development assistance (ODA) received (see Figure 2.2). Remittances are, however, spread

Figure 2.2: Total Remittances to Developing Countries (1988-1999)

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Source: IMF Balance of Payments Statistical Yearbook (Sumata, 2002)

At the family level, remittances not only ensure better standards of nutrition, health, housing and education, but, for many recipients, they form part of the survival strategy in the first place. The distributive and long-term developmental effect of family remittances is however questionable. It may be argued that family remittances lead to a phenomenon sometimes described as “new homes reachable only over dirt roads” as they exclusively benefit migrants’ families (Niessen, 2002: 9). Other theories argue that through the multiplier effect of remittances - which is at times estimated to be as high as three to four US dollars for each dollar spent locally - non-migrant families also benefit as remittances foster trade and services. Furthermore, migrants are in a position to extend the market for products from their home countries to new areas. However, in order to obtain such positive spill-over effects, remittances have to be spent on local products or services as opposed to imports and migrants need to be interested in promoting local products abroad. Collective remittances represent an interesting attempt to spread the benefits of emigration to the wider community. At the state level, migrant-sending countries benefit from remittances as a pivotal source of foreign exchange. The importance of macro-economic effects of remittances will be dealt with in section 2.3, which is exclusively dedicated to remittances.

Many migrant-sending governments are understandably interested in tapping into the investment potential of migrants. Yet trans-national entrepreneurship is not open to everyone, as it depends on whether a migrant avails of human, financial and social capital which he or she is willing to invest in the country of origin. The example of Colombia highlights that investment often occurs only on a small scale and that larger investments require not only entrepreneurial skills but also a stable economic and political environment. For investments to have a major positive impact on the economy, jobs need to be created and backward and forward economic linkages established.

Box 2.1: Investment of Colombian Migrants in Colombia

Three important sub-sectors of the Colombian economy are strongly connected to trans-national migration – housing, small and micro-enterprises, and family subsistence. In cities with a contracted local market, migrants’ relatively high purchasing power has become a significant market for developers. A more common trans-national activity is the creation of small commercial and service ventures (grocery stores, restaurants, repair services, light manufacturing) by migrants who have either returned or are sending remittances to support their businesses from abroad.

Source: Nyberg Sørensen et al., 2002: 1

The frequently strained local labour market can experience two interlinked positive effects of emigration: the supply of workforce decreases and, in turn, local wages may rise. However, the first effect rarely leads to the second one in developing countries since an oversupply of workers tends to remain even after strong migration outflows. Furthermore, negative effects - such as brain drain and a reduction of the already weak stabilising middle class - shall not be underestimated.

Negative Effects

The intensity of the brain-drain effect depends on the ratio of highly skilled emigrants compared to the total population, whether certain areas of expertise are particularly affected by emigration and on how long well educated emigrants stay abroad. Recent approaches adopted by the International Organisation of Migration and within the United Nations Development Programme (UNDP) favour assisted voluntary return and knowledge exchange programmes (“Transfer of Knowledge Through Expatriate Nationals”). Since the very well educated tend to be the most internationally mobile group, brain drain does constitute a major threat to many developing countries. For example, among emigrants from Ghana, Egypt and South Africa, 60 per cent were graduates (Olesen, 2002). Policies that favour “brain gain” through the maintenance of links with migrants are therefore strongly recommended.

However, bad governance is frequently not only the reason for why such links are rarely promoted by governments, but also for the low return rate of migrants.

Examples of Eastern and Central Europe after 1990, Chile after the departure of General Pinochet in 1990, South Africa after the end of the apartheid regime in 1990 and, most recently, Afghanistan and Iraq after the departure of oppressive regimes have shown that when the human rights situation improves, return migration starts, regardless of the fact that the economic situation in the home country may be unchanged (Olesen, 2002: 11).

According to Olesen, it appears that the maximum benefit to the sending country is obtained “when highly skilled migrants leave for a relatively short period of 10 to 15 years, remit while they are away and return with financial as well as human and social capital” (Olesen,

2002: 11). The appearance of new terms such as “brain circulation” confirms such new migratory trends with regard to the highly skilled. Yet repatriation also has a negative effect: declining remittances.

Apart from being frequently unequally distributed among countries and the population within a country, remittances may decline either because of return, the economic situation of the migrant living abroad has deteriorated or because migrants advance in Castles and Miller’s migration stages (Skeldon, 1997: 36):

Box 2.2: The Four Stages of Migration

STAGE 1: Temporary labour migration of young workers, remittances of earnings and continued orientation to the homeland.

STAGE 2: Prolonging of stay and the development of social networks based on kinship or common area of origin and the need for mutual help in the new environment.

STAGE 3: Family reunion, growing consciousness of long-term settlement, increasing orientation towards the receiving country, and emergence of ethnic communities with their own institutions (associations, shops, cafés, agencies, professions).

STAGE 4: Permanent settlement which, depending on the policies of the government and the behaviour of the population of the receiving country, leads either to secure legal status and eventual citizenship, or to political exclusion, socio-economic marginalisation and the formation of permanent ethnic minorities.

However, the remittance-decline hypothesis, which is based on migration stages, proves to be too simplistic to capture reality. The underlying reasons for remitting money are very complex and should not be limited to close family contacts alone. Other types of obligations within the larger family often exist and, even if some migrants do cease to remit, new migrants will always arrive who will, in turn, send money back home. Apart from personal links with families and friends, the idea of “returning as soon as the situation has improved” lingers on many migrants’ minds although some may eventually remain in the host country.

Yet this hope of return, together with the inherent connection to one’s country of origin, also ensures a strong interest in the home country’s developmental success.

Another potentially detrimental aspect of the infusion of high amounts of remittances is the inflationary effect on the local economy, particularly on land and real estate prices (Nyberg Sørensen et al., 2002). For instance, Cuenca - an Ecuadorian city that is estimated to receive around 50 per cent of the country’s remittances - is now reported to be the most expensive city in the country.¹⁵

2.3 Remittances

This section will initially look into the macro-economic importance of remittances for migrant-sending countries followed by a study of possibilities of promoting the increase of remittances as well as their channelling for developmental purposes.

2.3.1 Macro-economic Importance of Remittances

Funds are remitted through a variety of means: checks, money orders, electronic transfers, couriers, postal service, hand-carried, in-kind remittances, etc. Since some of those means of transmission are difficult to control, statistics can only include officially recorded remittances. 50 per cent of the world’s officially recorded remittances are distributed among only six countries (see Figure 2.3) with Latin America and the Caribbean being the region that receives the largest share of all remittances (see Figure 2.4). Whether remittances have a strong or rather a weak macro-economic impact on a country’s economy depends on the respective general economic performance and on the income category of the country in question. The lower the income category, the higher the potential impact of remittances.

Among the ten countries receiving most remittances, two are low-income, six are lower middle-income and two are upper middle-income countries (Mexico and Brazil). Although the middle-income countries receive larger amounts of remittances, remittances constitute a much higher share of total international financial flows for low-income countries (Gammeltoft, 2002).

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¹ World Bank website, World Development Report 1995: www.worldbank.org/wdr/wdr95/previous.htm (accessed on 21 November 2002)

² UN website, Art. 13 Nr. 2 of the Universal Declaration of Human Rights (“Everyone has the right to leave any country, including his own, and to return to his country”): www.un.org/Overview/rights.html (accessed on 10 May 2003)

³ Grantmakers Concerned with Immigrants and Refugees website: www.gcir.org (accessed on 15 April 2003)

⁴ Refugee Council website, UN Convention Relating to the Status of Refugees: www.refugeecouncil.org.uk (accessed on 20 May 2003)

⁵ OECD/SOPEMI 2002 (2003), Trends in International Migration, Paris: OECD Publications

⁶ Defined as persons outside their country of birth or citizenship for 12 months or more.

⁷ Grantmakers Concerned with Immigrants and Refugees website: www.gcir.org (accessed on 15 April 2003)

⁸ Population Reference Bureau website: www.prb.org (accessed on 15 April 2003)

⁹ OECD/SOPEMI 2002 (2003), Trends in International Migration, Op. Cit.

¹⁰ ECLAC (2002), La migración internacional y la globalización, in Globalización y desarrollo: www.eclac.cl (accessed on 15 January 2003)

¹¹ Including Argentina, Bolivia, Brazil, Costa Rica, Chile, Colombia, Dominican Republic, Ecuador, El

Salvador, Guatemala, Guyana, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay, Venezuela.

¹² Since Africans make up less than two per cent of the total US immigration, I restricted the figurative display to the two main regions of origin for reasons of simplification. However, it deserves to be mentioned that 74 per cent of all African immigrants to the US avail of tertiary education, which gives them the highest percentage of all three regions.

¹³ Note that all remittance data are estimates. Data generally are considered underestimates, since most include only the officially recorded flows.

¹⁴ 1 US Dollar = 0.871087 Euro (23 July 2003)

unevenly over the globe with Sub-Saharan Africa and South Asia registering declining figures, whereas Eastern Europe, Central Asia, South and Central America as well as the Caribbean receive an increased share of global remittances (Nyberg Sørensen et al., 2002).

¹⁵ El creciente éxodo de ecuatorianos deja el país vacío (2002), El País, 24 November 2002