FINANCIAL CRISIS IMPACTS REMITTANCES FLOWS TO GUATEMALA

UNCLAS GUATEMALA 001357 SIPDIS E.O. 12958: N/A TAGS: EFIN ECON GT SUBJECT: FINANCIAL CRISIS IMPACTS REMITTANCES FLOWS TO GUATEMALA ¶1. SUMMARY: The International Organization for Migration (IOM) presented its annual survey on remittances for Guatemala on October 17, 2008. According to the IOM, about 30% of Guatemalan families receive remittances. The IOM projects that as a result of the financial crisis, remittances to Guatemala will increase by only 6.5% for 2008, ending five straight years of double digit growth (14.4% in 2007). The IOM also said deportations directly reduced remittances by approximately $55 million in 2008. END SUMMARY. ¶2. On October 17, 2008, the International Organization for Migration (IOM) presented the results of the 2008 Survey on Family Remittances for Guatemala. Victor Lozano, IOM program officer for Guatemala, pointed out that there are about 1.5 million Guatemalans living abroad, 97% of which live in the United States. Of these, about 1.3 million send remittances to their families in Guatemala. The proportion of migrants who send remittances has climbed steadily from 79.2% in 2002 to 85.3% in 2008. ¶3. According to IOM estimates, 4.1 million Guatemalans, about 30% of the total population, benefit from family remittances. The majority of remittance beneficiaries live in rural areas. The departments receiving the highest shares of the total sum of remittances are Guatemala (20.9%),San Marcos (10.1%),Huehuetenango (9.2%) and Quetzaltenango (6.0%). Lozano highlighted that 35% of Guatemalans who send remittances lived in departments with poverty rates above 70%, including San Marcos, Huehuetenango, Quiche, Totonicapan, Solola, Alta Verapaz, Baja Verapaz and Jalapa. ¶4. According to survey data, recipients of remittances receive an average of $4,000 - $4,500 per year. About 47% of remittances are spent on food, clothing, and transportation and about 25% is invested or saved. Of the remainder, 15% goes towards "intermediate consumption," such as purchases of materials for a small business, payments of rent, or payments for the migrant's travel to the United States. About 12% goes to social investment (health and education expenditures). The survey also reveals that remittances are sent mainly through electronic transfers (86%) and bank transfers (10.2%). ¶5. The IOM projects that as a result of the financial crisis, remittance growth will slow to 6.5% in 2008, from $4.12 billion in 2007 to $4.39 billion in 2008. The survey shows that Guatemalans living in the United States work mainly in the retail and wholesale sectors (25%),services (17%),construction (17%),industry (13%), and agriculture (9%). The IOM estimates that Guatemalans working in the construction and manufacturing sectors in the United States are the most affected by the financial crisis. The IOM also estimates that as a result of deportations remittances in 2008 will be reduced by approximately $55 million in 2008. The IOM pointed out that Guatemalans continue to emigrate to the United States. According to IOM figures, 28,000 Guatemalans will be deported from the United States during 2008, and about 50,000 Guatemalans were able to illegally cross the U.S. border during the last 12 months. ¶6. COMMENT: The initial impact of the economic slowdown on remittances was reflected in 2007 as the growth rate of remittances fell from 20.6% in 2006 to 14.4% in 2007. The continued drop to 6.5% in 2008 is a result of the deepening economic slowdown in the United States. If economic conditions in the United States continue to deteriorate, remittance flows should continue to slow or even decline in 2009, affecting mainly populations in those departments Qdecline in 2009, affecting mainly populations in those departments with the highest poverty rates. MCFARLAND