Jamaican remittances weather downturn, for now - Cocking cites family loyalty

Published: Friday October 3, 2008

The Inter-American Development Bank warned this week that the pace at which remittances once flowed will slow down even more than it originally projected, due to the erosion of the dollar's value, a spike in inflation and the financial meltdown in the United States.

But at least two remittance companies in Jamaica, say for now money transfers from the United States are still strong despite the financial crisis there.

"We have not seen any fallout at all, none. It is same as usual," said Andrew Cocking, deputy group president and head of international business at the Capital and Credit Financial Group, whose money transfer operation is handled by subsidiary Capital and Credit Remittance Limited.

"It is one of the most robust businesses and when you look at the increase of 11 per cent for Jamaica, even though many other markets around the world have gone down, Jamaica has continued to grow," he said.

Mexico, for example, where remittance is the second largest foreign exchange earner behind oil revenues, transfers from its neighbour and main market, the United States, fell 12 per cent to US$1.9 billion, compared to US$2.2 billion in August 2007, said the central bank.

Growth

For the first eight months of the year, they dropped four per cent to US$15.5 billion.

Nominally, the IDB expects regional remittances to grow to US$67.5 billion in 2008, up from $66.5 billion last year.

But when adjusted for inflation, the bank said the value of the transfers would be 1.7 per cent less than the 2007 remittances.

Remittances to Jamaica have been tracking at about US$155 million per month, up to the first quarter of 2008, compared to US$141 million per month for the comparative 2007 period.

Cocking said many Jamaicans in that market were very committed to their responsibilities back home, keeping the remittance market strong in Jamaica.

"It shows us the commitments to family because even before this, the numbers were going down in other countries but Jamaica's continued to go up. So, that tells you that there is a strong commitment between people's family and the obligations they have here," he said.

Jamaica National Money Services also reported that it has not seen any immediate fall-off in business.

"There is an anticipation that the effects of the US fallout (will) reverberate throughout the economy, (and that) you may have a slowing down of the remittances or maybe even quantum, but right now the inflows are pretty consistent with predictions within this market."

Double digit growth

Remittances to Latin America have consistently recorded double digit growth, but that pattern was broken last year.

The IDB warned earlier this year that the rate of growth could further be eroded, given signs of a US recession. It has now added Spain to the equation, whose economy is also said to be headed towards recession as Europe fights off contagion from the US downturn as well as inflation.

Jamaica, however, bucked the regional trend. Remittances in 2007 climbed 23 per cent, from US$1.6 billion to US$1.97 billion.

Important economic role

For the first four months of this year, January to April, remittances reached US$623 million, reflecting growth of 58 per cent - or more than 14 per cent per month - through commercial banks and remittance companies, according to the latest Bank of Jamaica balance of payments data.

IDB president Luis Alberto Moreno signalled confidence that remittances would continue to play an important economic role in the region and in its poorest households.

"People who are already abroad will adapt, looking for new jobs or cutting back on consumption in order to keep sending money home," said Moreno.

"Those thinking of migrating will probably opt for destinations where the economy is stronger and more jobs are available.

Industrialised nations will continue to attract migrants but we expect to see an increase in remittances between developing countries, as more people move to places less affected by the global downturn."

The IDB also said that notwithstanding the economic slowdown, the volume of remittances to Latin America and the Caribbean still outstrips all the overseas development aid and foreign direct investment in the region.

"Remittances are and will continue to be a vital lifeline for millions of households," the IDB said.


Source:
Dionne Rose
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081003/business/business7.html
dionne.rose@gleanerjm.com