Photo: Geoff Oliver Bugbee for Mercy Corps

A recent survey by the Inter-American Development Bank found that over the past two years, the number of Latino immigrants sending money home from the U.S. has dropped by more than 20 percent.

Though the amount of money transferred from the U.S. to Latin America has increased by about 1 percent to $45.9 billion, the Bank estimates that more than three million Latin American workers no longer send remittances to their home countries. Higher prices, fewer low-paying jobs, and a crackdown on illegal immigrants were cited as reasons.

The survey should be cause for concern in Latin America, where remittances have played a significant role in reducing poverty and promoting economic growth. Indeed, Professor Rafael Pampillon of Spain’s Instituto de Empresa business school notes that the total amount of remittances to Latin America is greater than the combined amount of foreign investment and development aid to the region. A May 4 editorial in the New York Times spells out the potential negative impact:

Immigrant workers are not just vital to the American economy, their money transfers are a critical bulwark against poverty for millions of people south of the border. Cutting off that lifeline will lead to more misery in some of the poorest parts of the hemisphere — and it will feed the desperation that sends more migrants to the United States.

What impact is the U.S. economic slowdown having on developing countries? Matt Homer of the World Politics Review writes that the weakening U.S. dollar is having an adverse effect on individuals in developing countries relying on remittances for large parts of their income. A bigger problem, however, is that the negative impact of the declining dollar is likely to go beyond the individual level. For a number of developing countries, remittances make up a significant percentage of total GDP, and several countries are already expressing concern that a decrease in remittances could hurt their entire economies.

In Tonga, for example, remittances account for just over 32 percent of the country’s total GDP. Yet because up to 80 percent of all remittances come from sources in the U.S., there is concern that continued declines in the U.S. economy “will hit Tonga extremely hard.” Economists in Nicaragua are also predicting that “any decline in the amount of remittances will undoubtedly affect consumerism within the Nicaraguan economy.” While around 40 percent of Nicaraguans receive remittances, most of which come from the U.S., economists estimate that almost 90 percent of remittance money sent to the country is spent in the local consumer economy.

To some the word "immigration" evokes an image of people standing in line at Western Union, waiting to wire money home to families for groceries and clothing. It happens thousands of times each day all over the world. All those remittances — the small amounts of cash wired across borders — add up to a whopping $300 billion a year.

Dilip Ratha believes this $300-billion industry can play an important role in international development. He's a World Bank employee who is working to make it easier for migrants to transfer money and direct the cost savings towards economic development in their own countries.

Skeptics argue that if remittances equaled development, Mexico would look like Switzerland. Ratha might argue that without remittances, Mexico's economy might look a whole lot worse. His new paper suggests that Africa could add as much as $3 billion to public coffers just by reducing the costs that migrants pay to send remittances. (Currently, charges on these cross-border money transfers can be as high as 10 percent.)

Ratha hopes to prove that hundreds of billions of remittance dollars can be funneled toward poverty alleviation by making simple policy changes.

His personal story has shaped his beliefs. In the U.S., he earns a salary that is 100 times what he could have earned in his birthplace of India, and his own remittances have helped build schools and pay medical bills there.

And while the negative impacts of immigration often make headlines, Ratha stresses that there are costs of not immigrating, too — costs borne by people living in poverty and by everyone in the global economy.

While the immigration debate in the United States is largely focused on the U.S.-Mexico border, an article from National Geographic looks a bit farther to the south. An estimated 400,000 migrants from Central America cross the border into Mexico every year, and though some stay to work in Mexico, most are headed for the U.S.

The economic prosperity of the U.S. has a strong pull effect on the Latin American poor, and the money that migrant workers send home to their families is having an increasingly large impact on their national economies. In Honduras, for example, remittances sent home from the U.S. made up one-fifth of the country’s gross national income in 2006.

“There is no solution to this,” a former Chiapas state official said wearily, after ticking off a list of southern border upgrade programs that have fizzled into ineffectiveness over the past decade. “You can put all the control measures down there that you want, but it’s not going to be fixed. The solution is to eliminate poverty.”