NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, November 1, 2006

It’s the sort of scene that many development economists believe could transform some of the world’s most impoverished regions, by putting cash directly in the pockets of the poor. With tens of millions of migrants around the globe sending remittances home, the flood of money has grown immense — $167 billion last year, according to the World Bank.
This lively mountain town survives on money sent from its sons and daughters living in the U.S. On days payments arrive, lines at the local credit union can reach 150 deep. The crowds then hail motorcycle taxis and head for the town’s open-air market to stock up on food and clothing, or browse tiny appliance stores stuffed with blaring televisions and stereos.

It’s the sort of scene that many development economists believe could transform some of the world’s most impoverished regions, by putting cash directly in the pockets of the poor. With tens of millions of migrants around the globe sending remittances home, the flood of money has grown immense — $167 billion last year, according to the World Bank.

But Ciudad Barrios also demonstrates why reliance on remittances may turn out to be the latest development fad that fails to live up to its hype. The downside: a cycle of continued poverty, as dependence on remittances turns the town into a kind of ward of the U.S. Those with entrepreneurial ambition head north, emptying out the town of its talent. Only a tiny fraction of the money they send home is invested in industry or agriculture that could produce jobs. And with the breadwinners away, organized thugs pounce on a place where money pours in from outside. All of that leaves little opportunity for the next generation except to follow their predecessors north, if they can.

Continue reading “Migrants’ Money is Imperfect Cure for Poor Nations“