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Remittances and the International American Dream
Almost 2 million young people who entered the United States as children have the opportunity, beginning this month, to become legal immigrants, fulfilling the aspirations of their families who brought them to the country without authorization. It’s a classic – if roundabout – story of the American Dream. It’s also the most important immigration policy reform since the Immigration Reform and Control Act of 1986.
If you talk to immigrants about their motivations for coming to the United States, providing more opportunity for their children is at the top of their list. The new Deferred Action for Childhood Arrivals program is a major step toward this goal.
Bringing your family to the United States to raise them as Americans is a story we all know – it’s a centuries-old part of our folklore, even if it’s still hotly debated. What’s less understood about immigrants is that they also often support family members left behind in their home countries. In addition to supporting themselves and their families here, immigrants are bulwarks against hunger and poverty for their families in Mexico and Central America.
Nowhere is this more evident than among people from the countries of the Northern Triangle – El Salvador, Guatemala, and Honduras – who comprise the second-largest group of unauthorized U.S. immigrants after Mexico.
There are approximately 2.5 million immigrants from the Northern Triangle in the United States, and in 2011 they sent home more than $10 billion in remittances. Remittances are important to Northern Triangle economies: they make up 17 percent of the gross domestic product in Honduras, 16 percent in El Salvador, and 10 percent in Guatemala. These amounts dwarf the two other main sources of international funds -- foreign direct investment and overseas development assistance. It’s widely understood in both the United States and Central America that if immigrant remittances disappeared, it would be a major blow both to the region's economies and to the well-being of millions of poor families.
Between 20 percent and 30 percent of families in Northern Triangle countries receive remittances, usually averaging between $200 and $400 a month. Remittances allow families to send their children to school, eat more nourishing meals, schedule needed doctor’s appointments, and pay their rent.
The U.N.-affiliated International Fund for Agricultural Development concludes that “Families receiving remittances are—by virtue of the remittances—no longer among the poorest of the poor.” How much do remittances affect national poverty rates? The World Bank’s research shows that in Latin America, a 10 percent increase in the remittances-to-GDP ratio (for example, from 20 percent to 22 percent of GDP) leads to a 3.7 percent decrease in moderate poverty and a 2.9 percent decrease in extreme poverty.
Legalizing students who would qualify for the Dream Act will help them integrate into America’s economic mainstream and allow them to better support those in their countries of origin. But while legalization is good news for immigrants in the United States and their families in Latin America, remittances could be used more effectively.
Today, remittances are mostly used for survival— they prevent millions of families from falling into (deeper) poverty, but they don’t change the economic status quo. Perhaps the remittances’ greatest potential – fueling productive investment that generates jobs and income and reduces immigration pressures – is untapped.
In spite of the billions of dollars in remittances sent to the Northern Triangle by immigrants, poverty rates remain high: in El Salvador, Guatemala, and Honduras, they are 38 percent, 51 percent, and 59 percent, respectively.
Northern Triangle governments need a national framework for investing remittances in productive enterprises. Families who receive remittances need training and support in how to invest in sustainable businesses. Without collaboration among people in the diaspora, U.S. development agencies, and governments in the region, the impact of remittances will remain limited.
The American Dream has always been an international aspiration. With better integration of U.S. migration and development policies, the realization of immigrants’ American Dream could be used to reduce poverty – as well as the socioeconomic pressures that drive unauthorized migration.
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