Remittance fears keep growing

Published: Wednesday October 1, 2008

There are fears that the economic downturn in the United States may have a negative impact on the amount of money sent back home by the Jamaican diaspora - the majority of whom are based in that North American country.

Remittances are an important part of the Jamaican economy, and according to the Inter-American Development Bank (IDB), represents about 18 per cent of Jamaica's Gross Domestic Product (GDP). Last year, Jamaicans abroad sent home just under a whopping US$2 billion.

But economic concerns in the US has culminated in recent weeks with the collapse of Wall Street and the rejection of a US$700-billion bailout plan by congress. Since the start of the year to August, an astonishing 605,000 Americans have lost jobs, pushing the nation's unemployment rate to 6.1 per cent, the highest in five years. This bitter news has brought about jitters among people from all walks of life within the Jamaican community - both home and abroad.

Investment and Commerce Minister Karl Samuda addressed the issue last week while speaking at the global launch, in Jamaica, of the World Investment Report 2008. He said that it is quite likely that Jamaica could see tremendous pressure on the levels of remittances that the country has become so dependent on over the years.

"Were it not for our remittances, we would be in serious trouble in terms of our rate of exchange; our currency would be devalued because, at the moment, our inflows from remittances exceed any other category," noted Samuda.
"This places us in a precarious position if we consider, for instance, the development in the United States, which may have a severe impact on our diaspora who have been sending funds back to Jamaica."

Samuda said he has already been made aware of Jamaicans in the US encountering problems because of the economic fallout.

"Recently I heard stories of persons in Jamaica being requested by residents overseas to assist them rather than the other way around because things have become so difficult," said the minister.

The Business Observer spoke to both overseas-and local-based Jamaicans to assess whether the much-anticipated adverse impact on remittances was already being felt.

Anthony Scott, a trader who currently resides in the US, usually sends US$600 to his family here in Jamaica weekly, but told this newspaper that he has recently decreased the amount of money he sends as well as how often he sends it because of financial constraints.

"Now I can only afford to send US$200 or less," said Scott, who is currently vacationing on the island. "Normally I send money every week, but now I send it every other week or whenever I can find the money."

The situation is no different for local-based Arthur Lewis, who normally depends on at least US$200 from his daughter every month.

"I have not received any money from her in a while, I know that what is happening in the US will definitely affect how much she sends," said Lewis, who is currently retired.

Housewife Hyacinth Brown has not yet felt the pinch from the fallout in terms of the money her daughter sends, but she said it is only a matter of time until the US$100 she normal receives is lessened.

"Right now I get money from her at least twice a month and sometimes one time for the month, but I know that the whole thing that is happening in the US is going to affect us," she said.

However, there is no empirical evidence to suggest that the economical woes in the US is affecting the growth rate of remittance inflows to Jamaica. According to data from the Bank of Jamaica, remittance inflows from the start of the year to July was US$1.2 billion, 10 per cent more than the comparative period last year. This is more or less on par with the average year to year growth rate since 2005.

Meanwhile, when the Business Observer visited several Western Union branches in the Corporate area over the weekend, it appeared to be business as usual, as people waited in traditionally long lines to collect money sent from abroad.

"We are one of the few branches that are always busy because we are centrally located and nothing has really changed yet," said Roger Toms, assistant manager of Super Plus in Cross Roads. "There are times when we run out of cash."

The Western Union, which is located inside the supermarket, was so packed that some customers were seen on the outside waiting to be dealt with.

The scene was no different at another branch in Cross Roads in the vicinity of the Inland Revenue Department where the supervisor was too busy to speak with the newspaper. It was also a similar scene at the Pavilion Shopping Centre in Half-Way-Tree where the line for the FX Trader paled in comparison to that of the Western Union. That branch sees more than 500 customers daily.

"I don't think there is an impact. In fact, we have seen an increase," a senior employee said. "People are sending more money especially now [month end] into the first week of October."

Looking outside of Jamaica, a slowdown is already evident in Latin America - whose sub 10 per cent remittance growth rate last year was the slowest in almost 10 years; and while it appears to be business as usual today in Jamaica, fears will always be present as the world's economic power continues to get a battering up North.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20080930T200000-0500_140782_OBS_REMITTANCE_FEARS_KEEP_GROWING.asp