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Remittances To Latin America And The Caribbean in 2012
The total amount of remittances received by countries in Latin America and the Caribbean (LAC) in 2012 remained nearly the same as in the previous year, resulting in a practically null rate of growth at the regional level.
Since the final quarter of 2008, rising unemployment in traditional remittance-sending countries such as the United States, Spain, and Japan, along with the resulting reduction in income of the LAC migrants living in those countries, led to an unprecedented drop in remittances to the region. Remittance flows began to stabilize in 2010, followed by a slight period of recovery in 2011. Nonetheless, the data from 2012 once again show stagnation in growth, with the total value of remittances received by countries in LAC measured at US$61.3 billion.
From 2002 to 2008, the annual growth rate of remittance flows received by LAC reached 17% on average. Nevertheless, starting in mid-2008 with the impact of the economic crisis, the flow of remittances experienced negative growth, with a percent change of more than -15% in 2009. During the first months of 2010, the remittance growth rate started to show signs of recovery; first a deceleration of its fall, which during the last quarter of the year turned into a positive rate of growth of 4.9%, a process that continued throughout 2011 to achieve an annual growth rate of 6.0%.
Nonetheless, as was observed during the last quarter of 2011, the rate of growth began to drop, turning negative again during the second half of 2012, leaving the overall annual growth rate at only 0.6% compared to the year before.
The quarterly growth rates of remittances flows in 2012 were 3.9% and 3.6% in the first and second quarters, respectively, followed by a decrease that resulted in a negative growth rate of -4.5% in the third quarter. This reduction appeared to decelerate in the final quarter of the year, with a growth rate of -0.8%, which while still negative, was significantly lower than that of the previous quarter. This suggests that the drop observed during the third quarter might be attributed to a particular shock whose effects could be drawn out throughout the following quarters.
During the economic crisis experienced by traditional remittance sending countries in 2008, a heterogeneous behavior of remittance flows was observed in the various regions within LAC, and for that reason it is necessary to deconstruct these flows into blocks, in which countries displaying similar characteristics are grouped together to allow for better study. For the purpose of this analysis, the region has been divided into four blocks: Mexico, Central America, the Caribbean, and South America.
Remittances inflow trends varied among countries in Latin America and the Caribbean. While remittances to South American countries and Mexico decreased by 1.1 percent and 1.6 percent, respectively, the countries in the Caribbean displayed modest growth and Central American nations experienced a significant increase of 6.5 percent in the total remittances received. This increase helped offset decreases in bigger countries, allowing for the region as a whole to end the year with slight growth.
At the same time, following the economic crisis, remittance inflows in the Caribbean region displayed an accelerated recovery in 2010 with a growth rate of 8.3%, attributed in large part to the unusually high volume of transfers received in Haiti in response to the earthquake experienced that year. In 2011, the growth rate relative to the prior year’s reached 5.9%, similar to the rest of Latin America.
During 2012, the quarterly growth rates in this region remained low, growing only 1.1% during the first quarter and 0.1% during the second. In the third quarter, similar to the trend seen in Mexico but on a smaller scale, remittance flows experienced a drop of -3.5%, then recovered during the final quarter with a rate of 1.6%. The combination of these fluctuations left the region with an overall growth rate for the year of 0.1%, with total remittances flows marginally higher than in the previous year. It is important to emphasize that among Caribbean countries, only the Dominican Republic displayed significant growth with an overall rate of 4.8%. This is consistent with the observed behavior of inflows to the majority of Central American countries, which, like the Dominican Republic, receive most of their remittances from the United States.