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ATMs could improve lives of Latin Americans receiving funds from U.S.

November 30, 2003

WASHINGTON - Many Latin Americans who receive money from immigrant relatives in the United States don't have bank accounts, making it difficult to save some of the $30 billion sent back to them, international banking officials said.

Relatives spend much of the money on essentials like food and utilities. But after those bills are paid, there aren't enough institutions in which to open bank accounts and build wealth, especially in rural areas, said Donald Terry of the Inter-American Development Bank.

According to an Associated Press report, 77 percent of Central Americans who receive remittances from a relative in the U.S. don't have a bank account, along with 64 percent of Mexicans and 45 percent of Ecuadoreans.

Those figures are included in a recent study released by the Pew Hispanic Center and sponsored by the development bank, both of whom are encouraging financial institutions to expand into those areas by offering ATMs and other services.

Banks not only would enable more people to build savings, but give them more incentive to invest in wealth-building opportunities like homeownership, Terry said.

Using banks could reduce the amount paid in fees to wire the money home -- the method that most immigrants use to send money to Central America and Ecuador, said Manuel Orozco, a project director at the Inter-American Dialogue, a Washington-based center for policy analysis.

The fees have declined in recent years, according to the AP report. For instance, the average Western Union fee to wire $200 to a Latin American country in 2003 was $10, half the fee charged in 1999, Orozco found in a report released last month.

But it's still cheaper to send money through a bank if available. Orozco said the average fee on $300 transferred through an ATM was about $6.

Several U.S. banks, including Bank of America, Wells Fargo, Citibank and U.S. Bank, offer ATM-based remittance services to Mexico, in some cases partnering with Mexican banks to do so. (See related stories More U.S. banks provide ATM-based money transfers to Mexico, BofA offers surcharge-free ATMs in Mexico and BofA adds new features to card-based money transfer)

Overall, the roughly $30 billion sent to Latin America through remittances far exceeds the U.S. foreign aid flowing to all nations -- $17.2 billion this fiscal year.

The new report said 42 percent of adult Hispanic immigrants -- around 6 million people -- regularly send money to their homelands. The study found 28 percent of adults in El Salvador, 24 percent in Guatemala and 18 percent in Mexico receive money from relatives in the U.S. Most of those receiving money are women.

Remittances, though, also take away money that could be injected into the U.S. economy, said Dan Stein, executive director of the Federal for American Immigration Reform, which seeks to reduce immigration.

The Pew study found that people receiving money from U.S. relatives are more likely to think about emigrating themselves. In Mexico, for example, 26 percent of respondents who received payments said they were thinking about moving to the U.S., compared to 17 percent of those who do not receive any financial help from relatives.

"How does it help the U.S. economy to see billions and billions of dollars leave?" Stein asked. The best countermeasure would be to eliminate illegal immigration, he said.

The Pew report was based on surveys of residents in El Salvador, Ecuador, Guatemala, Honduras, and Mexico, with a separate survey of Hispanics living in the U.S.