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Decline in World Remittances Expected This Year

Immigrants and migrant workers around the world send money to their countries of origin to help support their families. For many countries, remittances are an important source of income. But recent studies indicate a downward trend that will cause hardship in many poor countries.

Sending less home

Daisy Benitez came to the United States from El Salvador ten years ago. She is now married, has two children and works cleaning houses in Virginia. But she still sends money every month to her parents in El Salvador. "I used to send them $200 and now $150 or $125 because with this economy I cannot send them what I used to," she said.

Benitez says her parents are farmers, but when there's a drought their income drops dramatically.

Her friend Elsa Maria Gonzalez is living in the U.S. without legal papers. She used to send about $250 a month to her children in El Salvador. But now she says she can barely afford half that amount. "There is no work because for those of us without legal papers it is very difficult to get a job," Gonzalez said.

Remittances to developing countries expected to drop

Daisy and Elsa are not unique. The World Bank estimates that about half of the remittances from the U.S. to Mexico come from undocumented immigrants. It says remittances to developing countries are expected to drop between 5 and 8 per cent this year.

Remittances are an important source of income for many people in developing countries. A decline will cause widespread hardship.

Dilip Ratha is lead economist at the World Bank in Washington DC. He manages information on migration and remittances. "The flows of remittances were rising at about 15, 20 and 30 percent per year for the last five years," Ratha said. "But unfortunately, with the crisis now, we are expecting a slight decline of about five, maybe in the worst case even eight percent decline."

Last year, remittances sent by migrants to developing countries exceeded $300 billion, according to the World Bank. But in reality, the amount was much larger because remittances are frequently sent through informal channels.

"The number one remittance recipient country in the world is India which is estimated to have received $45 billion in 2008 compared with Mexico $26 billion, that's the third larger recipient," Ratha explains. "Number two is China."

One cause: high unemployment and/or less income

Another study on remittances from the United States to Central and South America predicts a seven percent decline this year, because of the growth in unemployment and the loss of earnings among migrants.

Manuel Orozco of Inter-American Dialogue, a Washington research institute, conducted the study. "We are talking about a million households that will not receive money in 2009," he said. "And four million who will receive 10 percent less."

He says a seven percent cut in remittances to the region will represent a loss of $4.5 billion, dealing a blow to Latin American economies.