People from developing countries, who work in developed countries, send home a lot of money each year, $167 billion in 2005 for example. An infusion of cash like that can give the home country a boost.
But, Bob Davis reports in today's Wall Street Journal reports (Migrants' Money Is Imperfect Cure for Poor Nations, November 1 - subscription required), there is a downside:
But Ciudad Barrios [a town in El Salvador Davis uses as a case study - Ben] also demonstrates why reliance on remittances may turn out to be the latest development fad that fails to live up to its hype. The downside: a cycle of continued poverty, as dependence on remittances turns the town into a kind of ward of the U.S. Those with entrepreneurial ambition head north, emptying out the town of its talent. Only a tiny fraction of the money they send home is invested in industry or agriculture that could produce jobs. And with the breadwinners away, organized thugs pounce on a place where money pours in from outside. All of that leaves little opportunity for the next generation except to follow their predecessors north, if they can.
Many of the people sending home the remittances are working hard and making difficult sacrifices:
Francisco Membreño, once a Ciudad Barrios coffee farmer, left his pregnant wife in 2000, worried that he wouldn't be able to support his newborn. He hasn't ever been back to meet their son, Ronald, who's now 6 years old. Mr. Membreño works two jobs cleaning offices in Washington, D.C., making $575 on a good week, and sharing an apartment with another Salvadoran.
Each month he sends home about $300 to his wife, Ernestina Argueta, who moved with Ronald to her parents' sweltering concrete house lit by a single light bulb. The money goes for food and medicine mostly, says Ms. Argueta, with a little left over to save to expand a tiny plot of land her husband purchased and hopes someday to cultivate. Though her elderly mother dreams of a new sewing machine, Ms. Argueta says, "For now, we're not buying anything, until he comes back."