Remittances, Free Trade and Cross-Border Banking

From AOL Money and Finance via PR Newswire.

DALLAS, Aug. 20 /PRNewswire/ -- Remittances to Mexico, free trade and cross-border banking are the focus of the Federal Reserve Bank of Dallas' latest issue of Southwest Economy. Find the July/August issue online at http://www.dallasfed.org . Lower money-transfer costs and better measurement techniques likely explain the post-2000 growth in remittances from the United States to Mexico, according to Dallas Fed assistant economists Jesus Canas and Roberto Coronado and senior economist and policy adviser Pia Orrenius.

In "Explaining the Increase in Remittances to Mexico," the authors assert that the growth in the Mexican migrant population and their income alone can't account for the increase in remittances.

"Real remittances grew 170 percent from 2000 to 2005, but in the U.S., the Mexican-born population grew only 20 percent," they write.

Instead, they find that more migrants are turning to formal channels to send remittances due to reduced fees and that the Banco de Mexico has modernized procedures for collecting and recording remittance data.

"Spurred by declining costs for both senders and receivers, migrants increasingly have been transmitting remittances through formal channels rather than informal channels, such as carrying cash back home," according to the authors.

Many Americans get only the protectionist viewpoint on free trade, says Blake Hastings in this issue's "On the Record" conversation. "They rarely hear how protectionism distorts the economy, leads to higher prices, breeds mediocrity in service and product quality, and reduces variety," says Hastings, vice president in charge of the Dallas Fed's San Antonio Branch and former executive director of the Free Trade Alliance in San Antonio.

Hastings points out that South Texas cities, including San Antonio and McAllen, are reaching out to China, Brazil, Canada and Europe for trade opportunities. "All these communities are learning that you can't just wait for trade to come to you," he says.

In "Banking Industry Evolution Along the Texas-Mexico Border," economic analyst Joaquin Lopez and senior economist and policy adviser Keith Phillips review presentations from a recent Dallas Fed conference, "Cross-Border Banking." They report that as opportunities for banking increase along the border, the divide between U.S. and Mexican financial systems will continue to fade.

Speakers at the conference included Dallas Fed international financial analyst Edward Skelton, who said that explosive growth in the securitization and mortgage market in Mexico will boost the nation's economy by encouraging higher-quality housing, increased savings and greater wealth creation. SOURCE Federal Reserve Bank of Dallas

Remittances - United States to Latin America

According to a study conducted in October 2006 by Monetary Investment Fund/Fondo Multilateral de Inversiones (MIF/FOMIN) reveals some interesting dynamics of the U.S. to Latin America remittance market.

[The MIF/FOMIN] study indicates that 12.6 million Latin American immigrants living in the United States will send about $45 billion to their families in 2006.

• The percentage of immigrants sending money on a regular basis to their relatives has increased from 61 percent in 2004 to 73 percent in 2006.
• The average amount of each remittance sent from the U.S. has increased from $240 in2004 to $300 in 2006.
• The percentage of immigrants that use a bank or credit union to send remittances has increased from 8 percent in 2004 to 19 percent in 2006.

The size of this market cannot be ignored.

The large numbers of transactions and funds indicated in this survey allow participating firms to vastly increase the standard of living in recipient countries by leveraging existing trends without having to further access funds from overburdened governmental and non-governmental (NGO) organizations.

IPM is positioned to enable companies to participate and benefit from this market while benefiting remittance senders and receivers.

The Growing Remittance Market

The remittance market is growing around the world. In the United States, the remittance market is usually associated with the southwestern border states with Mexico.

As seen in the article published by the Federal Reserve Bank of Atlanta, four of the top ten U.S. states where remittances originate are in the southeastern United States.

Banks are interested in building infrastructure and knowhow but there are still many gaps which IPM (International Personnel Management, LLC) is here to fill.

Migration Phenomenon Beyond the United States

There are immigration trends throughout the Americas beyond the immigration of Mexicans to the United States.

According to a study* conducted by the Multilateral Investment Fund (MIF), "there are now significant communities of Bolivian migrants in Argentina, Nicaraguan migrants in Costa Rica, Guatemalans in Mexico, Peruvians in Chile, and Haitians in the Dominican Republic."

The MIF was formed to fund projects that stimulate the economies of Latin America and the Caribbean. There are numerous transactional opportunities beyond the United States/Mexico market.

*study titled Sending Money Home; Remittances as a Development Tool in Latin America and the Caribbean