Overseas Remittances Promoted by US Treasury Dept.
Focus is on promoting competition and development, official says
WASHINGTON, DC - 10/14/03 - The US Treasury Department is seeking to promote competition in remittances services in order to lower the cost of sending money from the US to people overseas and to improve overall efficiency.
"Remittances are quickly becoming the central source of new foreign capital for many countries," said Assistant Treasury Secretary Wayne Abernathy during recent testimony before the House Financial Services Committee in Washington.
The money sent home by migrants now makes up a significant share of national income in many countries, he said, citing estimates that people around the world sent $72 billion back to their homelands in developing countries in 2001.
In Latin America and the Caribbean, remittances in 2001 equaled 7.9% of the gross domestic product (GDP) of Ecuador, 8.5% of the GDP of Honduras, 9.3% of the GDP of the Dominican Republic, 13.5% of the GDP of Jamaica, 13.8% of the GDP of El Salvador, and 16.2% of the GDP of Nicaragua, he said.
Abernathy also stressed that the actual value of financial remittances is "likely to be higher" than official figures indicate.
"This is just what is reported formally," he said of current remittances figures. "The total amount is likely larger and exceeds the total amount of official development assistance that is provided to poor countries."
The single largest bilateral remittance market is between the US and Mexico.
In 2002, Mexican-Americans sent an estimated $10 billion to their families in Mexico and are expected to send $13 billion in 2003, Abernathy said.
Treasury is promoting competition in the US for remittance services, advocating competition in recipient countries for the receipt and distribution of remittances, and working to improve links between the US financial system and the financial systems in recipient countries, he said.
"Our experience has been that promoting competition works," Abernathy said.
Following the December 2001 launch of a US-Mexico project on remittances, "we have seen several major banks enter the remittance market, expand their product offerings in the market and reduce their fees," he said.
A similar effort between the US and the Philippines commenced in May 2003, "but it has already seen an increase in private-sector interest in extending remittance services to Philippine-American communities in the United States," he added.
"As long as there are no barriers to competition and an adequate financial infrastructure exists, competition will drive remittance costs down," Abernathy said.
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