Embarking on a trip to Tijuana, Mexico, with Dr. Sabith Khan as an MPPA student was a culmination of anticipation and eagerness, fueled by a yearning to delve into real-world issues and experiences. Having missed out on a previous opportunity due to lacking a passport, I was determined to seize this chance to explore and learn. Little did I know, the journey would profoundly expand my perspectives on the importance of public policies and fuel a desire for meaningful change in an area I knew little about.
Our first stop was at Xquenda Lab at El Colegio de la Frontera Norte, an open space for citizen science focused on the indigenous and migrant populations. Directed by Maximino Matus Ruiz and his team, the lab’s dedication to preserving indigenous languages through digitization was inspiring. Witnessing student research projects and indulging in sopes while overlooking the Mexican Pacific Coast fostered a sense of appreciation for educational initiatives driving social change.
Venturing further, our next stop was at Casa del Migrante, a sanctuary for migrants fleeing violence and seeking refuge. Run by dedicated social workers and volunteers, the facility offered essential services and support to individuals navigating the complexities of migration. Learning about the arduous journey migrants face, coupled with the bureaucratic hurdles of asylum-seeking, underscored the urgent need for policy reform and humanitarian intervention at all levels of the government. The facility can hold up to 200 people for up to 60 days. This conflicts with the 6 to 7 month current wait time for a hearing, so in the interim they help people build lives in Tijuana by securing employment, help to find housing, offer certification programs, and enroll children in school and provide childcare. The facility is funded by the Catholic Church, donations, and fundraising activities, and ran by staff and volunteers.
As a student of public policy and administration, the visit to Casa del Migrante was eye-opening. It shed light on the multifaceted nature of social issues and the imperative for compassionate, multi-dimensional solutions. The passion and dedication of the staff resonated deeply, reaffirming the power of empathy and advocacy in addressing systemic injustices.
Leaving Casa del Migrante, I was filled with a sense of urgency and purpose. The experience really prioritized the need to effect change and advocate for marginalized communities. It reinforced the importance of amplifying voices that are often silenced and the need for centering lived experiences and real stories in policy discourse.
Our journey concluded with a bittersweet visit to Friendship Park / El Parque de la Amistad in Playa de Tijuana, a binational park at the US -Mexico border. The park was inaugurated on Aug 18, 1971 by First Lady Pat Nixon. There were no border barriers of any kind at Friendship Park for generations. I couldn’t find the exact year that changed, but even after walls were built in 2011 San Diego Border Patrol officials still opened the park for limited hours each weekend through the slats of the wall. Over more recent years, this public access for US residents was restricted and in February of 2020, the park completely closed on the US side. Walking amidst murals and remnants of shared histories, I couldn’t help but feel the weight of missed opportunities for unity and solidarity. We did learn that there is a concentrated effort to reopen the park, and I sincerely hope there are ways for us as students to support it.
In closing, I extend heartfelt gratitude to Dr. Khan for his unwavering dedication to exposing students to diverse perspectives and social issues. His commitment to fostering experiential learning and nurturing compassionate leaders is truly commendable. Here’s to the next adventure, may it also be fueled by empathy, advocacy, and a responsibility and commitment to meaningful change.
During the COVID-19 crisis, Mexico and the Dominican Republic have been experiencing an unexpected increase in the remittance transactions. However, most of the countries in Latin America and the Caribbean saw a sharp decline in their remittance receipts in April, before they began to rebound in June of this year. The remittance flow to Cuba has been decreasing this year, and it is still expected to continue to drop.
The number of remittances to Cuba have been affected due to the COVID-19 impact on the countries of reception’s economy. Florida is home to the largest Cuban community of emigrants living abroad. As unemployment has increased in Florida, it has directly affected the Cuban community living there. Additionally, the number of remittances to Cuba have also been affected for two other reasons. First, the current Donald Trump administration has imposed restrictions on remittances setting a limitation of $1,000 per calendar quarter to an immediate family member in Cuba. Second, the lower remittance flow is also aggravated by travel restrictions imposed by the Trump administration, as well as the limitation of international flights to Cuba by the Cuban government as a measure to control the spread of the pandemic on the island. A significant part of remittances —be it money or products— enters Cuba through informal channels or the so-called mulas —people who bring money and goods to the island. Travel limitations decrease the number of remittances that enter Cuba through these channels.
During the quarantine, however, Cubans are exploring new ways to send remittances. A source highlights that it has become trendy among Cubans living abroad to send cryptocurrencies to a trusted contact in Cuba. The contact in Cuba delivers the equivalent in the local currency, either in cash or through bank transfers to the recipient’s Cuban bank account. This method favors not only families that receive remittances, but also entrepreneurs and enthusiasts of the cryptocurrency community in Cuba who access cryptocurrencies regularly.
In Latin America and the Caribbean, the impact of digital remittances is relevant, as the digital payment system is becoming popular among the entire immigrant population in the U.S. Digital remittances are now frequently used to pay bills for services such as electricity, water, gas, the home phone line, the monthly rent. Therefore, by sending digital remittances, family members living abroad from their home countries directly contribute to the payment of essential services necessary for their families. But the development of digital technology must go hand in hand with training in digital and financial education. Having a well-developed digital platform to send remittances to Cuba would help Cubans living abroad to keep supporting their families during this challenging time and fund businesses that foment development.
About the Author
Denisse Delgado is a Ph.D. student in the Public Policy at the University of Massachusetts, Boston. Her research focus has been on Cuban migration, remittances, and development. She is an active member of the International Organization for Remittances and Migration (IOREM) and a principal collaborator for Cuban Horizon at Columbia Law School. Denisse has been a visiting scholar at various universities, including the David Rockefeller Center for Latin American Studies at Harvard University and the Cuban Research Institute, Florida International University, where she was a visiting fellow last summer. This summer, Denisse was an intern in the Migration, Remittances, and Development Program at the Inter-American Dialogue, a think tank located in Washington DC. Before that, she was a researcher affiliated with the Havana think tank CIPS (the Research Center on Psychology and Sociology). Denisse earned a BA in Sociology from Universidad de la Habana and an MA in Social Development from Universidad Católica de Murcia. Delgado is currently exploring the impacts of COVID-19 on remittance flows to Cuba, exploring the significant contributions of digital remittances. She also studies Cuba’s diaspora economic and political participation in the process of change on the island.
With close to $500 billion of remittances flowing around the world, the phenomenon of remittances as a force for community development and individual empowerment cannot be ignored. Remittances impact the lives of almost a billion people, worldwide. While the flow of money during the best of times is constrained by various policy initiatives and the high cost of sending money, during the COVID-19 crisis, this problem has become acute. This policy brief is a call to action on how to ease the bottlenecks and help sustain this important lifeblood, for millions around the world. Remittances in the volume are three times as much as international aid, given by developing countries, to poorer nations and have a transformative impact on receiving communities, existing research has shown.
source: imf.org
Background
The United States remains the largest contributor to remittances worldwide, recording $68 billion USD in remittance outflows. The rise in remittances could be attributed to a fairly stable economy, strong job prospects for migrants among other reasons. The growth in remittances to South Asia and southeast Asia was 12 percent in 2019, according to The World Bank. To further emphasize the number of monies recorded that flow from the U.S.A., the next highest contributors are the United Arab Emirates and Saudi Arabia, at $44 billion USD and $36 billion USD, respectively. With the shutdown of local economies in the U.S. and concomitant restrictions on travel, the phenomenon of remittances is likely to see a shift, as well. Analysts are already pointing out that there could be at least a 7 percent drop in remittances this year, due to COVID-19 related closures.
With COVID-19 and a dramatic change in the landscape of work and travel, the landscape of remittances is likely to shift, dramatically. If one were to consider the US-Mexico corridor, which sees about $65 billion flows per year, this is likely to be impacted negatively, thus hurting millions of recipients in Mexico. Due to a lack of insurance and costs of healthcare in the U.S., many of the migrant workers are likely to self-medicate rather than approach the formal healthcare system, which may have other implications for their health.
Who sends remittances and why?
Remittances are usually sent by well-meaning family members and friends to their relatives, to help. This money could be used for consumption – paying school fees, medical expenses, or expenses such as weddings, purchasing or constructing a house, etc. These are gifts or repayments of loans that these migrants have taken, to support their journey to the U.S.
As Dilip Ratha, head of Remittances research at The World Bank points out, there are over 270 million migrants around the world, and most of whom live in cities. The remittances they send have a huge poverty reduction impact and are a lifeline for almost a billion people, around the world.
Some programs have evolved to encourage migrants to invest in infrastructure development in the country of their origin. Tres por Uno, a program initiated by the Mexican government is one such example. Several other countries such as the Philippines and India encourage their diaspora to invest in education, healthcare, and other sectors through NGOs and other organized entities that raise money in the U.S.
While migrants from around the world live and work in the U.S., the majority of remittances outflows are to China, India, and Mexico. It is estimated that 5.7% of U.S. households send money abroad & 2.4% send money on a monthly basis and the average remittance is in the range of $200-$300 per month, according to The World Bank. Researchers have pointed out that migrants of all income groups send money ‘back home’, however, there is empirical proof that those in the lower-income categories tend to remit more, as a proportion of their income than middle to high-income earners.
Remittances are sent via various channels, both formal and informal. For instance, there are reports of individuals collecting cash on behalf of their friends/relatives and handing this over to the recipients across the border. This is done either as a favor or in some cases, for a small fee. Such informal flows of money are obviously not recorded. Besides, there is also the traditional, centuries-old system called ‘hawala,’ which operates in the Middle East and Asia (and also parts of Africa) which evolved out of a need for conducting business and the need for cash liquidity over long-distances. As much as a third of Somalia’s GDP comes from remittances and several countries that are in the middle of a conflict or recovering from a war (Yemen, Syria, Congo, Afghanistan) receive a big portion of their GDP via remittances. This flow of money from high-income countries to developing or low-income countries is possible because of strong family ties, opportunities for migrants to earn more money in the U.S. than they could, in their home countries.
Policy implications
Remittances remain one of the most significant flows of foreign currency reserves to most developing countries. Besides providing support to families, remittances also have the potential to help with local community development, spur entrepreneurship, and sustain traditions and culture. Remittances also have a positive net impact on the American economy, if seen from a macro perspective.
As some American politicians have argued, remittances can be leveraged to further American foreign policy objectives. This has been tried in the past and can be further explored in the future, as the sheer amount of remittances makes it a significant tool and lever for both the countries, to base their relations. Facilitating the flow of remittances can demonstrate not only goodwill but also can be a smart policy decision, as it helps both countries and is a mutually beneficial transaction. As some scholars such as Kristin Johnson have pointed out, remittances benefit the U.S. as well. Some of the ways that this is true are
Remittances help receiving countries spend more in U.S. dollars, thus facilitating trade and boosting the volume. This is particularly true in the case of Mexico-U.S., with a shared border and very strong trading ties, going back to centuries.
Remittances help build financial infrastructure, which can help people be part of the financial system. This ‘inclusion’ makes them potential customers and part of mainstream society.
Problem areas & Opportunities
There are three broad areas of concern when it comes to flow of remittances : cost of remittances, regulation of remittances (including Know your Customers (KYC) laws) and the emergence of new forms of technologies that can facilitate the flow of money. These existed before covid-19, but with the new emergency, these areas are further cause for concern.
Given the volume of remittances, there has been a lot of government interest in the phenomenon of remittances. As a Congressional Research Service report points out, P.L. 111-203 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, has provided federal consumer protections on remittance transactions. It further points out that remittances are also subject to federal regulation to prevent money laundering and terrorist financing. The banking regulations around KYC are crucial to address, as they are seen as one of the major reasons for the high cost of remittances as well as delays in sending money, abroad.
The discussion and debate around KYC and related efforts includes identity check and ensuring that the recipient and sender are traceable and they are indeed who they claim to be. There are also limits on how much money can be sent as well as documenting the relationship between the sender and receiver.
With the rise of technology and the use of crypto remittances and other newer technologies, analysts have pointed out that through the use of automated identification, real-time transaction scanning, data analytics, and artificial intelligence, the issue of compliance can be dealt with. Biometrics has also been proposed as a potential solution. The use of fingerprint IDs stored on phones can help authenticate parties involved.
Oklahoma is the only state in the U.S, that levies a tax on remittances. This proposal of taxing remittances has been put forth at the federal level as well, most recently by Donald Trump but has been widely seen as a bad idea. The motive behind this move is to raise revenues for the U.S. government, but analysts have argued this is not helpful and ultimately counterproductive.
Several thinkers and scholars such as Peter Singer, have made the argument that taxing remittances is normatively not a moral argument. Given that wealthy nations have not helped the poorer nations as much as they could have, it is not morally right to tax these self-help initiatives such as remittances (Peter Singer, Famine, Affluence, and Morality, 1971).
Regulation and government involvement in this space has created layers of regulation, bureaucracy and unwanted delays in a phenomenon which is driven by individual initiative and creativity.
Many of these problems arise because many of the recipients (and senders in some cases) are unbanked. Lack of literacy and access to financial institutions can cause many of the issues related to tracking them and ensuring that the purpose of sending this money is legitimate. However, at the same time, many observers and practitioners in this space argue that the amount of money sent is so small – often a few hundred dollars – that over-compliance and over-regulating this space does not make sense.
Solutions
The following steps may be taken as a measure to prevent the drop-in remittances volumes due to COVID-19
There has been some debate around whether everyone in the U.S., whether documented or undocumented should be able to send (or receive) remittances. There are a few restrictions around sending remittances, such as the need for identification, etc. this has been criticized by those who care for a freer regime of remittances flow. Easing the requirements for ID can be a first step in facilitating the transfer of remittances. Given that the average remittances are in the range of $200-$300, the risk for this money ending up in the wrong hands is minimal.
While compliance of regulations is one of the main factors leading to a rise in the cost of remittances, there can be mechanisms to reduce this and hence, bring down the cost of sending money. As researchers have pointed out, there is a need to urgently bring down the cost of sending remittances, especially in conflict and post-conflict zones, to nonprofits and other social sector organizations, that cannot afford to spend huge amounts of money on just sending remittances, which often pay for salaries, etc.
Create special provisions for nonprofits and social service sector organizations and individuals sending money to these types of organizations: Existing rules do not facilitate the flow of money for nonprofits and treat them equivalent to other for-profit and government organizations. This means that individuals making donations to nonprofits and similar organizations (and those receiving them) face the same amount of scrutiny as regular for-profit organizations. As a Charity & Securities Collaborative report pointed out, 37% of nonprofits that operate globally face delays in wire transfers.
Leverage technology for the flow of money: Emerging technologies including blockchain promise very low – or no costs – to transfer remittances. Crypto remittances may not be fully operational in all parts of the world but are being experimented with. This may open a new frontier, which is very unregulated but seemingly safe, for those who know how to use it. Governments must move into this space, albeit as partners rather than the cop in town to make use of these emerging technologies to facilitate an exchange for its citizens. Biometrics, data analytics, and Artificial Intelligence can be used to track and monitor transactions for compliance.
The World Bank is projecting the largest decline in remittances in history, due to COVID-19. On April 23, 2020, The World Bank hosted a webinar with Dr. Dilip Ratha, Chief Economist Remittances unit at the bank on how we could keep remittances flowing. Here is an abridged version of the webinar.
Q: Can you give a broad overview of what’s going on?
Dilip: Globally $554 bn were sent last year, in remittances and we are expected this to drop to $445 bn – reduction by 20—30%. Rupture to poor countries. The human aspect is not to be underestimated. FDI, companies are sending it. The amounts sent are $100-$200 being sent in remittances. Perhaps a billion people are being impacted.
The main impetus for decline comes from the COVID crisis. Lockdown and social distancing. The main impact is coming when people don’t get jobs. Their incomes will fall and the inability to send money is impacted. There are other spillover effects that come from the fact that as economic activity comes down, there are ripple effects.
Q: Why is this decline so significant?
Dilip: There are about 270 million migrants around the world and most of them are in cities. In some cities, they maybe 40% of the population – NY, London, Paris, etc. These people sending these billions, are sending it to their families. This is used for consumption – food, education, healthcare, etc. The migrants who are sending money are poor, migrants. It has a huge poverty reduction impact. Nepal, South Sudan, Haiti, etc. sometimes remittances are 40%-50% of the income of the country and they are the lifeline for many people.
Given the shortage of food etc. that is being felt the impact could be severe, for food security as well.
Q: How’s pandemic impacting migration and labor?
Dilip: I don’t think migration has shifted significantly. There are travel bans, new migration is going to fall, but those who are here will stay. The stock of international migrants wont change much. In terms of internal migration, they are not able to go home, perhaps they’ll walk home – like in India. Villages have barricaded people.
There will be an impact over 6 months to a year.
Q: How are certain sectors going to be hit?
Dilip: In different countries, it may play out differently. There are two kinds of migrants. We see just one kind and not the other. The ones who are visible are doctors, white-collared professionals. NHS has a lot of doctors etc. The health sector is doing a little better. The agriculture sector is also in the news as there is a shortage of farm workers. That has huge implications for food security as agriculture season can be disrupted. Food prices are going up. What we don’t notice is the hospitality, retail sector, etc. they have been impacted as well.
Directly related to us is the money transfer industry. This is not considered an essential sector and we forget is that most of the people in the world don’t have access to digital services to send money. Most of the money sent it cash-to-cash (80%). Informal migrants send money through a store. Both the sending and receiving side of the stores are closed. This is a big impact on them.
Q: What’s the regional impact?
Dilip: The impact is global and declines in remittances may be historic, since the 1980s. In 2009, there was a drop of remittances of 5% and flow was above the pre-crisis.
The 2008 recession impacted just parts of the world. This crisis is impacting everyone, even in remote villages. That’s the context in which everything is impacted. Some will be impacted more than others.
Also, oil prices have fallen. Gulf and Russia are key for remittances. South Asia and North Africa receive a lot of remittances. The oil price issue is true in Russia. Rouble, the currency in Russia is also weakening in comparison to the US dollar. We are expecting the largest decline and global by about 20%.
Q: The bank is making $160 bn available over the next 15 months. What are some of the solutions?
Dilip: The policy response can be to think that alarge number of migrants are human beings and are concentrated in urban economic centers. Like humans, they need to be included in part of our healthcare, social transfer responses. Also, the most urgent. Also, remittance is a lifeline, and making them ‘essential services’ is key. Finally, we know that the only way for us to send money is digital, and yet, we know that poor people who work in the informal sector, are unbanked. Having access to a bank account is critical to use digital means to send money. Yet, there is an urgent need to bring them to the banking sector so they can use digital means. Some barriers include regulation: Know your customer, ID checks. And some suspicion that small amounts are money laundering etc. We need to decriminalize this.
Q: What about stranded migrants?
Dilip: Some of the migrants are in labor camps, etc. and there are refugee camps. They don’t receive the attention they deserve. Migrants are ignored or discriminated against. Countries of origin can play a big role in bringing them back to their home communities. When they are in different places, they need cash transfer programs.
Q: How can we help migrants who may be facing discrimination?
Dilip: Migrants are also being seen as vectors. We need to reduce discrimination against migrants too. Some education program is also key.
How do you reach out to folks without IDs is the problem. There needs to be a mindset that we need to help people.
