The Inmigrant Remmitances

(Translation)


There is a rising myth surrounding the immigrant remittances to Latin America. Everybody, from Washington to the local public opinion, ignited by the press and the respective Central Banks and financial authorities, recognize the obvious advantages of the huge volume of dollars derived from family remittances, significantly originated in the USA. They refer to the phenomenon as “the Philanthropic Diaspora”, they are analyzing it to identify the possibilities of better utilization of such funds, of understanding the profile of the remitter and the beneficiary. All this seems as if the immigrant has the duty to contribute to the economic growth of his native country.
But they all forget that to start with the senders are victims.
While there is a major debate on the possibilities that such monies represent for the local economies and the possibilities to redirecting them to investments in industry and real estate instead of consumer goods, everybody seems to forget that the reasons for the emigration were because of lack of employment opportunities, violence and sheer poverty, and are a direct reflection of faulty government policies, corruption and other problems that have traditionally plagued the region.
Slowly but surely these family remittances have become very important if not the most important source of income to most LATAM economies and, as percentages of GDP, are becoming strategic for the future development of the countries. The construction industry for one, survives largely because of these funds that are channeled to self construction and enhancement of otherwise very poorly planned marginal neighborhoods. Many children have their only opportunity to study thanks to their immigrant’s generosity and commitment to his family in his native country, again highlighting the government’s traditional failure in educational policies.
The vicious circle is exacerbated when you start reading about the effects of remittances on the local foreign exchange rates and the criticism from the exporters who see their terms affected by the increased offer of dollars in the economy or the negative effects on the dynamicity of the economic activity or, what is even worse, the fact that emigration provides a convenient escape valve for the very large percentages of unemployment and sub-employment prevalent in these countries. Moreover, these funds substitute the government’s responsibilities to provide social security and create more equitable salaries and fringe benefits which are implicit incentives to stimulate and promote emigration in lieu of profound social and economic reform necessary for the progress of the country. In Colombia for example, all remittances are subject to a new tax (when taxes are supposed to represent services provided not fines) and all remittances over US$200 have to be reported individually to address pressures of the exporter community and the preposterous suspicion of nexus to drug cartels.
Meanwhile, in the USA, the immigrant worker is the victim of persecution, discrimination and often times has to undersell his work in order to preserve his status.
Under these circumstances, when establishing any business that pretends to harness these variables successfully, one has to take into consideration the mistrust on any and all institutions, the lack of formal education, the possibility of English language limitations, and, perhaps most importantly, their resolution to send money to their families in their native countries against all odds.
To build on habit, the first thing that should be explored is to use the existing calling card distribution and utilization to build-in the financial features such as the capability for that card to be used as a US debit card, permitting purchases and ATM withdrawals, and, with the aid of IVR’s, web-pages and call centers, incorporate the cross border services associated with the remittance needs, such as cross border bill payments, local card loads, local ATM access, etc. Credit history build-up, picture ID, consumer lending can also become interesting features to explore. Grass roots organizations in the US should help penetrate the tightly knit network of distrust and prejudice towards financial products since they are commonly associated with banks and fees.
In Latin America, most probably the beneficiary too is un-banked or has chosen to be un-banked, much like the remitter. The access of cash payers to discounts and incentives from large merchants is limited, mostly because there is no way to verify if indeed the customer is recurring or not. Combining such facts, a stored value product can be very marketable and can bring to the immigrant additional benefits that will entice him to use the more sophisticated route.
The Global Payment Services-designed (sold to EMIDA, who discontinued it) ClubMEX/SiVale card program pilot, addressed each and every one of these issues and created the necessary combination of transport, technology and communications to interact two card programs (in Mexico and the USA) empowering the immigration community to take advantage of multiple ready made products in a one stop shop.