The number of people from Latin America in particular continues to rise at a steady clip, especially over the past decade, and what has attracted the public limelight in recent months is the sheer volume of money they send to family back in their home countries to help them out, which has increased considerably during that time. But while the practice may ultimately help improve living standards in developing countries, there is increasing fear that since the terrorist strikes on New York and Washington, it will become more difficult for immigrant laborers to remit funds back to their home countries.
Since the attacks, industrialized nations around the world including the United States have been united in their efforts to choke out terrorism by cracking down on their sources of funding. In particular, governments are scrutinizing the flow of funds from developed nations to largely Muslim countries, but they are also expected to be stricter about money transfers in general.
In the United States, the Patriot Act was signed last October, imposing new record-keeping and reporting requirements, including the holding of records on currency transactions and foreign bank accounts as well as increasing surveillance of non-banks such as money transfer companies, along with other legislation.
While there has yet been no drop in the amount of money sent back home by Hispanics since the terrorist attacks, "depending on what regulations the (U.S.) government imposes further, we could see a big decrease," said Manuel Orozco, project director of the Central America program at the Inter-American Dialogue, a research institute focusing on the region. He added that whatever steps the United States takes to crack down on terrorist financing networks could potentially have a severe negative effect on the already fragile Latin America economy.
What has become increasingly clear is that while the number of immigrants to North America continues to rise, those remaining in Central and South America are becoming more dependent on the income family members can send back.
The volume of money sent back to Latin America from first-generation Hispanic workers here accounts for over 10 percent of the gross domestic product of Nicaragua, Haiti, El Salvador, Jamaica and Ecuador. In fact, remittances to Nicaragua from the United States actually account for nearly a quarter of the country's GDP.
In 2001, the flow of funds through remittance totaled $23 billion, making it one of the biggest -- if not the biggest -- sources of foreign currency for many countries in the region, according to the Inter-American Development Bank, or IDB. But at a conference on remittance hosted jointly with the Multilateral Investment Fund on Tuesday, the IDB's President Enrique Iglesias told participants that the number was likely to be much higher.
"Remittance in kind is not accounted for in this number," Iglesias said, adding that people often go back to their hometowns loaded with goods for families in the region to ease their daily lives, if only temporarily.
"The implication (of remittance) for national economies -- and the corresponding potential multiplier effect on GDP, consumption and investment -- are becoming major financial and development policy issues for recipient countries throughout the region," the IDB stated.
That may well be. But it is also a fact that the majority of Hispanic workers sending money back to their home countries are in low-income jobs and often working illegally. As a result, a large number of immigrants do not have bank accounts, and resort to sending cash through money transfer companies such as Western Union that require less documentation but charge higher transaction fees and offer few other benefits.
According to a study commissioned by the IDB, 19 percent of all Latin American immigrants in the United States -- or 10 million adults -- send an average of $200 to their families back home about seven times a year. But as 64 percent of those earn less than $30,000 per annum, with a great number of them in the country illegally and without any documentation, only a fifth of them use a bank or credit union to send money overseas.
The others use money transfer companies such as Western Union and MoneyGram, which can deduct as much as a quarter of the small sum they are sending back to Latin America.
Yet, as the U.S. government steps up efforts to stifle terrorist financing through less transparent means such as hawalas -- the informal money transaction system favored in many Arab countries and by Muslims working abroad -- the U.S. Treasury is also making it more difficult for poorly paid migrant workers, who often are in the country illegally but nevertheless provide some of the most necessary services in a number of industries, to help out family members back home who are worse off than they are.
While some immigration reform groups argue that it is still far too easy for non-U.S. citizens and illegal immigrants to open bank accounts, others are pressing for further deregulation in having access to checking and savings accounts.
Deregulation advocates claim that while the current system may not prevent those intent on breaking the law and pursuing terrorist activities, tightening criteria still further would likely only hurt the poorest immigrants and their families.
Rep. Luis Gutierrez, D-Ill., for instance, has pointed out that many low-income immigrants, both legal and illegal, often need to resort to loose-knit financial systems not unlike hawalas to send money back home.
"We need to be very careful about tackling this issue of money-laundering," Gutierrez said before the House Financial Subcommittee on Oversight and Investigation, adding that in its efforts to trace the terrorist funding pipeline, the government should distinguish between black and gray activities.
The Senate banking committee will be holding a hearing Thursday. Meanwhile, the Treasury will present a report to Congress on April 24 to update members on progress the department has made in carrying out the Patriot Act.