Report on: Migratory Flows and Social Inclusion in Central America

Transcription

1 SWEDISH INTERNATIONAL DEVELOPMENT AGENCY (SIDA) Report on: Migratory Flows and Social Inclusion in Central America By Mona Serageldin Yves Cabannes Elda Solloso HARVARD UNIVERSTIY GRADUATE SCHOOL OF DESIGN CENTER FOR URBAN DEVELOPMENT STUDIES Cambridge, MA, September 2005

2 TABLE OF CONTENTS 1 Overview of Migration and Remittances in Central America Migratory Flows in Central America and the Caribbean Remittances to Central America and the Caribbean Region Migrant networks Remittances and Poverty Transnational Linkages and Migrant Communities Tapping the Development Potential of Remittances Mexico s Hometown Associations Migration and Remittances in Mexico The Evolution of Partnerships Between Hometown Associations and Mexican Institutions Migrants and Remittances in Nicaragua Municipal Incentives to Address the Local Impacts of Migration A Micro-credit Initiative Aimed at Migrants in Rivas, Nicaragua Migrants and Remittances in El Salvador El Salvador s Hometown Associations The two facets of migration in Salvador: Importing violence and promoting local development Concluding Remarks Annexe List of References Notes...24 STUDY TEAM Mona Serageldin, CUDS Yves Cabannes, CUDS, UMP-LAC Elda Solloso, CUDS 2

3 1 OVERVIEW OF MIGRATION AND REMITTANCES IN CENTRAL AMERICA The World Bank estimated that transfers of remittances reached US$126 billion in 2004, about US$10 billion more than the previous year. At a global level, remittances represent about twice as much as Official Development Aid (ODA), and they are the second largest source of external financing for developing countries after foreign direct investments (FDI) 1. Despite the magnitude of these flows, studies assessing their impacts on urban development patterns and their potential for financing local development are scarce. During the last few decades, Central and Latin America have experienced explosive growth in migratory population flows within countries and across national boundaries. Growing disparities in the distribution of wealth and income, aggravated by economic restructuring, financial crisis, wars and natural disasters have generated large flows of people moving between cities and across national, regional and international borders. Mobility has become an accepted fact of life in the struggle for survival and the search for opportunity. In many parts of the world, seasonal and cyclical patterns prevail, conditioned by economic, social and cultural factors. In Central America, Nicaraguans migrate to Costa Rica and Honduras and Guatemalans (predominantly ethnic Maya) to Belize. In addition there has been an influx of people from Central America into Mexico and US border towns, a region which boomed after NAFTA was enacted, but then lost over 300,000 jobs as a result of the slowdown in the US economy. The situation may improve now that growth has resumed in the US. Expatriate workers from the Caribbean, Central America, and South America have flocked to the US, as well as Portugal and Spain which serve as gateways to the EU job market. A recent special report by the Inter-American Development Bank estimated that Latin American expatriate workers send home 40 billion dollars in remittances each year. 2 (Orozco 2004) The magnitude of the phenomenon and its impacts are reshaping the structure of urban growth. Issues and concerns include the incidence of poverty, the proliferation of slums and unplanned settlements, and the challenges of social exclusion. These migratory flows and floating populations are creating new urban dynamics in affected countries and cities. They have added a layer of unprecedented economic complexity and social diversity in urban and rural settings. Understanding the multi-dimensional aspects of this phenomenon requires monitoring change in areas that are experiencing out-migration and places where migrants and expatriate workers are sending and investing remittances. The link between migration and the dynamics of the land and housing markets have not been studied. Poverty Reduction Strategies do not address the urban dimension of poverty as an essential component and in addition underestimate the impacts of migratory movements and remittances. Some Latin American municipalities have launched creative initiatives in this field and their experiences are well worth reviewing, particularly in terms of their impacts on local development policies. In this report, Mexico is presented as a precedent-setting example in which all levels of government are matching funds generated by remittances. Hometown associations (HTA s) created in the United States by migrants are undertaking local urban development projects in their hometowns and leveraging public resources to co-finance these projects. 3

4 Nicaragua and El Salvador are two of the countries most affected by migration. The case of Salvador is interesting as the country is dependent on remittances as its principal source of foreign exchange earnings. We believe their experiences will be of interest for multinational and bilateral development organizations involved in the promotion of local development and the reduction of poverty. 1.1 Migratory Flows in Central America and the Caribbean Poverty and ongoing economic crisis have fostered population movements and migratory flows in Central America and the Caribbean. Today, migration is an organized system in these regions. For the last three decades, Caribbean migration to North America in particular and to a lesser extent to France, the Netherlands and the UK has progressed steadily. Central American migratory flows have been linked to civil strife, armed conflict and natural catastrophes. Map 1.1: Main Movements of Refugees in Central America, 1980 s Source: ACNUR, La situación de los Refugiados en el Mundo 2000, Cincuenta Años de Acción Humanitaria. Before 1970, northward migrations from Central America and the Caribbean were usually seasonal and linked to the agricultural cycle, particularly to the planting and harvesting seasons when the demand for farm labor peaks. Another pull factor for migration is the increased demand for professionals in business fields in the US and Canada. The largest wave of out-migration from Central America occurred in the early 1980 s as a result of armed conflicts, particularly in Guatemala, El Salvador, and Nicaragua. Civil wars followed many years of political turmoil, involving confrontations between indigenous populations, landless sin tierra farmers and land owners backed by the military. These marginalized impoverished populations demanded redistribution of farmland and other social reforms. The general instability coupled with human rights violations perpetuated intraregional and inter-regional migrations, predominantly to Costa Rica, Mexico, the US, Canada, Belize and Honduras. The UN High Commissariat of the UN for Refugees (ACNUR) estimates that by 1990, about two million Guatemalan, Salvadoran and Nicaraguan refugees had set up residence in those countries 3. The last big wave of migration out of the Andean region of Central America and the Caribbean occurred during the decade of the 1990 s. This migration was fueled by growing economic disparities, the legacy of civil wars and the political turmoil. From 1990 onwards, economic restructuring reduced investment and led to a dramatic increase in the levels of unemployment, inequality, poverty and hunger in the LAC region. A decline in the levels of education, health and social services were also affected 4. Simultaneously, the demand for service workers and professionals in the North Atlantic countries increased 5. As migration expert Manuel Orozco points out, with globalization, Central America and the Caribbean moved from being agroexporting to becoming labor exporting regions. Today, the US is the preferred destination for migrants where about three million migrants from the Caribbean and two million from Central America currently reside 6. El Salvador is the primary migrant sending country in Central America and Salvadorans represent no less than 50% of all 4

5 migrants from the region to the US. Cubans and Dominicans constitute one of the largest Caribbean communities in the US and a third of the English Caribbean population currently lives in North America. Jamaicans, Haitians and Trinidadians constitute 80% of all Caribbean migrants living in Canada. 1.2 Remittances to Central America and the Caribbean Region Migration movements generate flows of DIAGRAM 1.1: Main Countries Receiving Transfers from Migrations remittances and are a global phenomenon fueled since 1990 by the impacts of globalization of the world economy among other factors. According to the Comisión Económica para America Latina (CEPAL), Latin American countries are among the main recipients of remittances. Six countries rank among the sixteen top recipients in the world. In order of magnitude of inflow, the six are Mexico (2 nd ), the Dominican Republic, El Salvador, Colombia, Brazil and Ecuador. Combined remittances to Central America and the Caribbean (exclusive of Source: CEPAL ECA, Estudios Centroamericanos Mexico) were estimated to be no less than US$10 billion in This amount represents about a third of the value of the remittances to the Latin American and Caribbean region, which stood at US$32 billion, in the same year. Transfers to the region have approximately doubled every six years 7. In the Caribbean, remittances grew from US$2.4 million in 1996 to about US$5.7 million in As shown on Table 1.1, Guatemala, El Salvador and the Dominican Republic are the largest recipients of remittances in the region. The inflow of remittances to Guatemala increased from US$584 million in 2001 to US$2.2 billion in Remittances represent a steady monetary flow that has become an essential component of national economies in migrant sending countries. In the Caribbean region, remittances outweighed Foreign Direct Investment and Official Development Aid in In Haiti, they accounted for 33% the GDP and 333% the value of its exports 10. In the Dominican Republic, total remittances of US$2.1 billion far outstripped ODA and FDI by 1,238% and 202% respectively 11. Throughout Central 5

6 America, remittances surpassed ODA and almost matched FDI. In Guatemala, the value of remittances represented 76% of the country s exports. In Nicaragua, they constituted 29% of GDP. 12 Central American remittances originate mostly in the US. Guatemala, El Salvador and Honduras together receive half of the total remittances to the region (US$5.2 billion). 13 Field observations indicate that official figures on remittances in these countries are underestimated, specifically for Mexico, El Salvador, Brazil and Ecuador. This is not surprising given the volume of transfers carried through informal channels. Table 1.1: Remittances to Central America and the Caribbean, 2003 Country Total Amount ($US million) Guatemala 2,211 El Salvador 2,210 Dominican Rep. 2,164 Jamaica 1,426 Cuba 1,296 Honduras 862 Haiti 851 Nicaragua 788 Costa Rica 321 Guyana 137 Trinidad & Tobago 93 Belize 74 TOTAL Source: IADB and Central Banks of each country quoted in Orozco, M., Remittances to Latin America and the Caribbean: Issues and perspectives on development, Report Commissioned by the Office for the Summit Process, Organization of American States, Washington DC, October Migrant networks Having a readily available network of family and friends is an essential factor in conditioning a prospective migrant s decision to leave the country. According to the IADB/FOMIN and the Pew Hispanic Centre survey on Central American remittance senders, the average cost of migrating from Central America to the US ranges between US$4,000 and US$5,000, an amount that could never be mustered without the assistance of family members. Once abroad, migrants can be away from family for as long as 20 year periods. In Central America it is typical to find young people who were brought up by grandparents or other family members and who only met their parent as teenagers or even as adults. Furthermore, networks of family and compatriots living in the US are a key resource since they typically host the newly arrived migrants and guide them to find employment. The last few years have witnessed an increase in the number of females who are migrating. In many labour sending countries, female migrants outnumber males. According to the IADB/PEW survey, 54% of all Central American migrants sending remittances home are women, generally 6

7 siblings or children of family members who remain in the home country. Interestingly, the majority of recipients living in urban areas have not completed primary education and are in the age group 14. Most migrants travel by land and enter the US illegally. As a result of the established permanent Central American population in the US, a highly specialized transnational industry has emerged in response to increasing demand for undocumented movement of migrants. This transnational industry led by coyotes is easily accessible to anyone intending to leave the region. Coyotes charge an upfront fee for providing services to migrants, without guaranteeing a successful arrival of the migrant into the US. Trips are often delayed or terminated due to the many risks encountered by the undocumented movement through different countries, ending with a final high-risk run across the US border Remittances and Poverty The IADB/ Pew survey shows that the vast majority of Central Americans who migrate aim to improve their quality of life and that of their families. Central American adults receiving remittances constitute 23% of the population. The survey also shows that almost three quarters of all recipients are low-to-middle income families who earn less than US$400 a month. Regardless of their destination, remittances act as a mechanism to alleviate poverty, particularly in rural areas. In Guatemala, annual remittances of US$173 per capita are twice the US$85 per capita income of the poorest 20% of the population and in Honduras, remittances are almost triple the per capita income (Table 1.2). Table 1.2: Per Capita GDP, Income Distribution, and Per Capita Remittances (US$) Annual GDP per capita of GDP per capita Remittances per capita GDP poorest 20% of poorest 40% per capita El Salvador 2, Dominican Rep. 2, Guatemala 1, Nicaragua Honduras Costa Rica 4, Source: World Bank, World Development Indicators (2003) quoted in Orozco, M., Remittances to Latin America and the Caribbean: Issues and perspectives on development, Report Commissioned by the Office for the Summit Process, Organization of American States, Washington DC, October Migrants from the Caribbean are typically highly skilled and educated workers. In Jamaica and Guyana, no less than 70% of people holding college degrees live abroad 15. Their departure affects the country s productivity and cripples the economy. Labour shortages have emerged in the midst of persistent unemployment 16. On average, Central American and Caribbean migrants in the US earn US$21,000 a year and remit about US$2,500 in installments of $200 to $300 per month 17. Those figures, however, represent average values and differences exist among various countries. Salvadoran and Costa Rican migrants send the most money home, with average monthly remittances of US$393 and US$340 respectively. Nicaraguans (who tend to earn lower salaries) and Haitians send between US$146 and US$153 a month, the lowest values for the Central American and Caribbean regions 18. The IADB/Pew survey also shows that in Guatemala and Honduras about half of recipients have been receiving remittances for less than three years. In El Salvador, however, 7

8 more than 50% of those interviewed have been receiving remittances for over five years. Immigrants who remit generally send more money as their earnings grow although they often tend to stop remitting as they take up residence and marry in the host country. Most recipient families spend remittances on basic needs such as food, health care and housing. Typically 3 or 4 people benefit directly from these expenditures. The survey indicates that Guatemalans have alternative uses for remittances: 10% invest them in businesses and 11% keep them as savings. As Orozco points out and as other studies suggest, about 10% of remittances could be saved by the receiving families. In order to leverage those savings, the Inter-American Dialogue, together with FOMIN (IADB) and the International Fund for Agricultural Development (UN) have launched a US$6 million fund offering grants to microfinance institutions, local enterprises and microcredit programs to enhance local markets. According to the IADB, 75% of remittances to Central America are transacted through electronic wiring companies such as Western Union 19. The cost associated with these transactions dropped from 15% in 2000 to 8% in The decline in fees is due, in part, to the emergence of competing money wiring companies. In Cuba, remittances are typically hand delivered which increases the cost to almost 17% of the value of the transaction. The majority of Guatemalan and Honduran migrants send remittances through Western Union or other similar companies. In Table 1.3: Spending and Investment by Remittance Receivers in Central America Nicaragua, Western Union monopolizes the market and charges fees of 9.73% of the transaction value, the highest fee in Central America. El Salvador, with its dollarized economy, offers the lowest transfer fees of the region (4.39%), due in part to many competing companies. Salvadoran migrants prefer to use financial institutions to transfer money to their families. According to the IADB and the Pew Hispanic Centre survey, a large majority of Central American recipients of remittances would support governmental action aimed at reducing the cost of transferring remittances. Furthermore, they would be willing to save part of their remittances if these were to be spent on local development projects that would benefit their cities and regions. Multilateral and non-governmental organizations would be the preferred formal institutions to manage these local development funds. Manuel Orozco discusses the potential of remittances and transnational linkages to offer a wide array of development opportunities and suggests these remittances should be channelled through formal banking institutions. His recommendation of a strategy of banking the unbanked, i.e. linking remittance transfers with banking options, has many benefits to offer migrants: the transaction costs are reduced; the capital transferred can be leveraged; credit ratings are established, strategic alliances are formed between money transfer companies and banks, and Item Percentage Household Expenditures 77% Education 7% Savings 6% Investment 6% Luxury items 3% Real Estate 1% Table 1.4: Educational Level of Remittance Receivers in Central America Educational Level Percentage Primary or less 64% Some secondary 14% Secondary graduate 14% Some college or more 8% Source: Suro, Roberto, Remittance Senders and Receivers: Tracking the Transnational Channels, Pew Hispanic Center, Washington, 8

9 retail and other stores can honour remittances for the acquisition of basic goods. Furthermore, linking remittances to microcredit and incentives to support micro-enterprises creates a potential that enhances the development of local markets. If 10% of remittances are saved or invested, remittance receivers would then be in a position to use their money for investing in economic activity. The private sector and organizations involved in promoting local development can become credit partners for potential investors. Evidence from our field work tends to support Manuel Orozco s contention that transnational linkages are, after remittances, the most important consequence of Central American and Caribbean migrations as they offer a unique development opportunity for the region if these linkages can be channeled to foster local and regional development. 1.3 Transnational Linkages and Migrant Communities Since the early 1980 s, migratory flows have created well established Central American and Caribbean communities in the US. These communities maintain strong transnational linkages with their countries of origin with respect to trade, tourism, telecommunications and transportation. Visits by Salvadorans who have migrated to the US account for 30% of all tourism in El Salvador. The average length of stay is two weeks and the average expenditure per day is US$50. Similar patterns prevail in Nicaragua, the Dominican Republic and Cuba. As a byproduct of the migrants visits to their home communities, Grupo Taca, a Central American air carrier, has enough demand to operate 21 daily flights between the US and El Salvador. No less than 70% of Grupo Taca s clients are Central Americans residing in the US and Canada 20. Another example of transnational linkages and economic connectivity is found in the increased demand in the US for goods such as beer, rum, and cheese produced in migrants countries of origin. In 2001, the value of exports of these nostalgic goods from El Salvador to the US rose to US$240 million, accounting for 10% of the total value of the country s exports 21. As a result of this demand, many migrants are investing their money in starting food production and distribution businesses in their home countries to target their compatriots in the US and Canada. Roos Foods, for instance, produces processed milk products in Nicaragua and El Salvador and sells them in the US TAPPING THE DEVELOPMENT POTENTIAL OF REMITTANCES 2.1 Mexico s Hometown Associations Migration and Remittances in Mexico Mexico s foreign exchange earnings from remittances are quite close to earnings from oil and gas exports and tourism. These latter two sectors have been the mainstay of the economy in the past two decades in terms of their contributions to the balance of trade. Since 1990, the importance of remittances has grown, almost equaling oil and gas. Manufacturing is the country s main exporting sector, but it is also its main import sector. Its rapid development as a result of NAFTA has resulted in a negative net contribution to the balance of trade as imports of capital and machinery outstripped the value of the products exported. 9

10 DIAGRAM 2.1: Mexico Source of Foreign Currency Earnings by Sector ( ) Source: Banco de México, ECA Estudios Centroamericanos DIAGRAM 2.2: Mexico Net Commercial Balance by Sector ( ) Source: Banco de México, ECA Estudios Centroamericanos

11 2.1.2 The Evolution of Partnerships Between Hometown Associations and Mexican Institutions Manuel Orozco s work on immigrant Latino communities in the US highlighted the emergence in the 1990 s of hometown associations among expatriate communities and their growing role in maintaining links with their hometowns in Latin America. Linkages have formed between the communities with strong transnational agendas and objectives. These associations combine social functions in the US with coordinated efforts at pursuing small development projects in their hometowns. HTA s and their remittances have had a dynamic effect and impact on the social development of their countries, providing a way for migrants to gain recognition by their home countries and increase formal relations with local institutions. Their agenda or activities vary according to the availability of resources, the relationship with their families and hometowns, the preference of their members, and the degree of organizational structure in the association. Most hometown associations are still small private voluntary organizations. They are, however, building the organizational skills of immigrants and creating an outlet for domestic civic involvement. HTA s, like other Latino non-profit groups, fundraise about $20,000 per year. Between 20-30% of migrants contribute to these collective remittances. An interesting feature is the evolution of the types of support that they fund, ranging from charitable activities mainly linked to the Church to investment projects aimed at profit making ventures to contributions to projects improving infrastructure and services in their hometowns and villages. They also organize and network to lobby their home and host country s political institutions to gain favourable policies and legislation affecting immigration. Migrant-sending governments are actively seeking to expand their links to HTA s in the US that have started to pool funds to finance development projects costing $5,000 to $50,000 and more. Governments and private actors have tapped the flow of remittances by selling bonds backed by enterprises and channelling returns into productive enterprises. 23 Recognizing the national and local impact of remittances and their multiplier effect has led other governments to emulate Mexico in offering creative incentives to attract remittance dollars to fund development. The infrastructure and development projects funded by these associations have created a momentum for public authorities and local entities to enter into partnerships with HTAs. Wellorganized programs have been able to attract international organizations to leverage local and HTA contributions. The most developed Home Town committees are the Mexican ones, often referred to as clubs by their members. They have expanded in the last few years and have started to form federations, as in the case of the Federation of Clubs from the State of Zacatecas (Mexico). In California alone these clubs have over 20,000 members. In his research on Mexico, Manuel Orozco has highlighted the development potential of HTAs philanthropic contributions. Mexico has taken the lead in recognizing the potential of these associations and in attracting their investments by offering incentives to finance joint projects. Special hometown development funds are created to leverage association funds with grants by state, federal, and more recently municipal governments. Expanding from the state one-to-one matching fund, the Mexican Government has launched the Programa Iniciativa Ciudadana to add one federal dollar to the two dollars already contributed by the migrants and the local governments (state and municipal). As a result, for each dollar transferred, three dollars are contributed in joint funding by the three tiers of Mexican government. Zacatecas, Jalisco, and 11

12 Guanajuato a region of high out migration were the first states to set up such funds. In the latter two states, the joint ventures were used to finance employment generating projects, mainly garment factories. Jobs were created and the relatives of migrants were given hiring preference. Nevertheless, the projects perpetuate the deplorable features of the maquiladoras system. 2.2 Migrants and Remittances in Nicaragua During the 1970 s, the combination of natural disasters and seven years of civil war ( ) reversed the economic growth that Nicaragua had achieved during the 1950 s and 1960 s. The war terminated thirty years dominated by the Somoza family s conservative dictatorship. In 1979, the Marxist revolutionary organization, the Sandanista National Liberation People s Party or the Frente Sandinista de Liberacion Nacional (FSLN) established a leftist government. The Government s attempt to address the key demands of marginalized populations, particularly the landless sin tierras farmers, generated population movements out of the cities and into the countryside. While supporters of the former regime fled to Costa Rica, Honduras, and the US, some of the Nicaraguan exiles returned home. Armed conflict among the revolucionarios Map 2.1: Nicaragua and counter-revolucionarios continued into the 1980 s. Finally the FSLN lost the elections in the early 1990 s and has not been re-elected since then. From 1993 on, the persistent economic recession, widespread unemployment and poverty and the deterioration of social services fueled another wave of migration to the US and, to a lesser extent, to Costa Rica. Two decades of civil strife inflicted severe economic and social hardships on the Nicaraguan people. In 1998 almost 48% of the population lived in poverty and 17.3% lived in extreme poverty. In urban areas, these percentages stood at about 30% and 8% respectively 24. In 2004, Nicaragua ranked 116 out of 179 in the Human Development Report. Source: Lonely Planet In 2002 Nicaragua received US$788 million in remittances representing 29% of the country s GDP, bringing an infusion of foreign exchange equivalent to 127% of the total value of exports 25. The average remittance sent by Nicaraguan migrants in the US is US$ Remittances, per capita at about US$130 represents over double the per capita income of the poorest 20% of the population, around US$50. Most migrants are from the urban area of Managua and typically have some skills. They have tended to head to the US where they work in the services and retail sectors. Almost 42% of Managuans reported to have at least one relative abroad 27. Nicaraguan migrants from the rural regions tend to settle in Costa Rica and Honduras, many of them working in agricultural activities. 12

13 2.2.1 Municipal Incentives to Address the Local Impacts of Migration The impact of migrations on urban planning and management at the local level in Nicaragua is not a priority of the National Association of Municipalities. According to one of the senior officers interviewed, mayors belonging to the Association do not view it as an issue they should address. The prevailing attitude is that migration is a national problem and not a municipal one. This view parallels that of FEMICA (Federation of Municipalities from the Centro America Isthmus). However, a number of mayors as well as numerous CBOs, particularly those in areas most affected by migration-such as in the Andean region adjacent to Costa Rica, think that migration has become a critical local issue. Nicaragua has a well-developed spectrum of National NGOs and activist networks. Some NGOs and support groups are active in the field of migrant-related issues (network of civil society on migrants) and work at the neighborhood level in places such as Leon that are impacted by the migratory movements. Meetings held with the representatives of the National Communal Movement in Leon, a city experiencing a high level of out-migration, showed that: They have little access to information on migration-related issues They are willing to reactivate the commission on migration that operated during the city development strategy consultation process guided by the UMP/LAC but is now inactive. There are entities that can have a positive role in mitigating urban violence by guiding youth in households with immigrant parents to productive and socially oriented activities. The Mayor and Municipal Council of Leon have created a commission dedicated to finding the means and methods of addressing and mitigating the negative effects of migration on poverty and the ensuing violence caused by growing inequalities. The city developed an Action Plan and a Priority Action Program for neighborhoods with a high proportion of migrants. The projects included in the Priority Action Program have been integrated into the city s Annual Investment Plan. The follow-up of implementation and the evaluation of its impact at the neighborhood level will be of great interest. 13

14 Illustration 2.1: Open Space with playground managed by the community. Illustration 2.2: Community Center managed by the local community. The façade displays a mural referring to life without violence in a neighborhood with a high proportion of migrants Illustration 2.3: Low-income neighborhood. Many of the families have more than one member working abroad. Illustration 2.4: House rebuilt last year by migrants returning home on holidays. Money was brought in rather than sent to avoid the cost of transfers. In Central America, the problem of violence is linked to inequalities generated by misdirected economic and social policies and civil unrest. It has been exacerbated by the impacts of globalization and migration. In her study of violence in the Central American region, Caroline Moser discusses the determinants of violence in urban contexts, and finds that inequality has been more influential than poverty as a generator of violence. Since inequalities are generally more marked in urban than in rural areas, the hardships endured by the poor heighten the potential for conflict and violence in cities. Moser advocates urban community-based interventions and citizen/public community security through national and municipal programmes. The objective is rebuilding social capital, trust and cohesion in informal and formal social institutions. The research sponsored by Habitat and UMP in low income neighborhoods of Leon showed that migrants destinations were 81% in Central America (68% in Costa Rica) while about 15% 14

15 settled in the US. Of these migrants, 53.4% were female and 46.6% were male. About 85% of families were receiving monthly transfers of around $US 77. Migrants from Leon are considered part of its citizens and it is hoped that they can contribute and play an active role in the development of neighborhoods housing a concentration of families with migrant members if an appropriate action plan can be adopted and implemented by the municipality in partnership with NGOs to involve them A Micro-credit Initiative Aimed at Migrants in Rivas, Nicaragua Rivas is a secondary Nicaraguan city, located not far from Costa Rica, one of the main destinations of Nicaraguan migrants. A national NGO, PRODEL, sponsored by SIDA, set up an innovative micro-credit program in 2004 in Rivas. The housing micro-credit system was tailored to the needs of families with migrant members. PRODEL had previous micro-credit experience with Nicaraguan migrants within Costa Rica, trying to support their access to housing. In the destination countries, the results were disappointing. Very few loans were disbursed, mainly because of the lack of interest of the migrants. This is not surprising since most migrants are interested in maximising their savings by reducing their living expenditures particularly on housing. They are remitting to their families and investing in accessing and improving their housing conditions in their hometowns. PRODEL reformulated the program in Rivas and structured it to support progressive home improvement. A SIDA grant provided the initial capitalization. The fund is managed by a Micro Finance Institution, working locally and selected by PRODEL. No savings are necessary to take out a housing loan. An interesting aspect of the system is how the value of the loan is calculated. The maximum monthly repayment accepted by the bank is equivalent to 25% of the following entries: 100% of the main source of income to the family, plus 60% of the secondary source (if any), plus 50% of the declared remittances. Therefore, the loan is based on total family income supplemented by the remittances, given that the latter will most probably be used to pay back the loan. At the time of the field visit, the maximum term of the loan was 5 years at an annual interest rate of 16% on the outstanding balance, plus a 2% fee for management and technical assistance. The program has been well received and 340 credits were signed in the first six months. The average loan amount was US$1200, slightly more than the US $ 786 average of micro-loans in other sectors. This experience is still at a pilot stage. Its progress should be monitored and its performance assessed. It offers an interesting instrument to accelerate the improvement of living conditions in cities experiencing high levels of out-migration. For comparative purposes, the structure of a microfinance scheme in Maracaibo, Venezuela, a city experiencing an influx of migrants from Colombia is summarised in Annexe A. 2.3 Migrants and Remittances in El Salvador Since the early 1980 s, migration had become a well established system in El Salvador. The Civil War which erupted in 1980 as a result of confrontation between the National Liberation Front 15

16 ( Frente Farabundo Martí para la Liberación Nacional ) (FMLN) and the conservative government spread social and economic instability aggravated by perceptions of Communist expansion into Central America. No less than 75,000 Salvadorans were killed during the twelve year war. Armed conflict, violation of human rights, and severe economic hardships triggered the departure of a large number of refugees to Costa Rica, Mexico, Belize and the US. The 1980 US Census registered 94,440 Salvadoran migrants in the US. By 1990, Salvadorians represented 40% of the migrants leaving Central America to the US. The Peace Agreements signed in 1992 allowed the political and economic situation to slowly stabilize. However, no significant social programs were put in place to deal with the cumulative consequences of a decade of conflict and impoverishment. Natural disasters compounded the devastating effects of man-made disasters. Hurricane Mitch in 1998 and a 7.6 degree earthquake in 2001 spread new devastation in the country. Housing, basic infrastructure and services, as well as agriculture and fisheries were severely affected. The added hardships propelled another wave of out-migration from El Salvador mainly to the US. In 2004, El Salvador ranked 103 out of 174 in the Human Development Report 28. Remittances, which had been steadily growing at an average rate of about 12% since the mid- 1990s, almost tripled in 2000, reaching US$1.77 billion. In 2002, they constituted 18% of the GDP and 71% of the country s exports. In 2003, remittances totalled US$2.2 billion and El Salvador was, together with Guatemala, the largest recipient of remittances among Central American countries (table 1.2) 29. Salvadorans account for no less than 50% of all Central American migrants in the US and Canada. According to the last US Census, the number of Salvadorans living in the US reached 800,000, although the actual figure is probably much higher due to undocumented workers 30. Today no less than 52% of Salvadoran adults have at least one family member living in the US who remits an average of US$393 per month. All regions in El Salvador receive remittances benefiting 28% of the population (around 1.3 million people). In some locations, this share reaches 40% of all households. San Vicente, Cabañas, Chalatenango, Morazán, La Unión and Sonsonate are the Salvadorian regions with the highest rates of migrants and the largest volume of remittances. These are predominantly rural areas, which include some of the poorest households in the country. Remittances to these areas are helping alleviate poverty. On a per capita basis, they multiply by a factor of 3.2 the annual income of the poorest 20% of the population estimated at US$ Table 2.1: Average Amount Remitted by Migrants in the US and the Cost of Transfers Country Average (per month) Cost to send (%) El Salvador $ $15.07 (cost to send $250-$300) 4.39 Nicaragua $ $14.60 (cost to send up to $200) 9.73 Source: M. Orozco, The Impact of Migration in the Caribbean and Central American Region. 16

17 Table 2.2 Family Members Sending Remittances (El Salvador) Frequency of Remittances (El Salvador) Value of Average Remittances (El Salvador) Family Member Percentage Family Member Percentage Value Percentage Parent 15% Once a month 45% $50 or less 25% Sibling 33% 2-3 months 20% $51-$100 35% Spouse 5% 4-6 months 20% $101-$150 23% Child 30% At least once a year 18% $151-$200 21% Other 25% Less than once a year 10% $251-$300 5% More than $300 7% Source: Suro, Roberto, Remittance Senders and Receivers: Tracking the Transnational Channels, Pew Hispanic Center, Washington, D.C. November 24, El Salvador s Hometown Associations The Government of El Salvador is developing programs to leverage and attract the increasing flow of remittances. It is offering incentives to the Salvadoran hometown associations (HTAs) in the US to partner with federal, state and municipal governments to finance development projects. This matching grant program started in 2002 replicated the Mexican scheme described in section 2.1. It encourages HTA s to participate in development projects and is offering sums of less than one million dollars to be matched by HTAs thereby channelling remittances towards infrastructure and economic development projects. One of the key features of promoting development through the transfer of remittances is to create incentives for both senders and recipients to use established financial institutions such as banks and credit unions to increase the availability of capital so that the basic factor for generating growth is through savings, interest rates and investment. Linking remittances transfers with banking options reduces the transaction costs of sending remittances, leverages the capital potential through banking and financing and establishes credit ratings The two facets of migration in El Salvador: Importing violence and promoting local development One of the increasing challenges municipal governments in El Salvador are facing is the issue of violence directly linked to migration patterns. Caroline Moser points out that while violence in the majority of Latin American countries is now predominantly urban rather than the rural violence which occurred in the past, in El Salvador as in other post-conflict countries rural violence is often still more prevalent. Of the total number of homicides, 76 percent occur in rural area, against 24 percent in urban areas. The youth gangs, maras, modelled after the maras gangs active in Los Angeles, provide the training ground for individual gang members. The expansion of the maras in various municipalities of the San Salvador urban area is a cause of concern although the impact of gang violence in the various cities is not as dramatic as the widespread perception of insecurity and fear of violence would indicate. 17

18 In a contrasting positive development, with about 2 million Salvadorans living in the United States and approximately 500,000 in other countries, hometown committees have evolved into sophisticated entities. The hometown committees function as a channel to maintain contacts with those who stayed home and as a way to finance local development projects. CARECEN is an NGO created by former legal and illegal migrants that have decided to help develop their places of origin, and give their families access to a level of service that will tend to reduce the need for migration with all the risks and humiliations it entails. CARECEN is composed of migrants and ex-migrants, active in various cities of the country and abroad. They advise prospective migrants, help them before they leave and facilitate their journey to their destination. They also advocate for the rights of migrants, both in the US and in El Salvador. CARECEN estimates that around 200 Hometown Committees are active and they often gather, as in the Mexican case, migrants from the same villages that usually migrate to the same cities in the US. Even if a significant percentage of the Salvadorian migrants are from cities, the Hometown Committees are much more a village and rural base movement than an urban one, as social relations tend to be less cohesive in cities. CARECEN lobbies local governments in order to have their projects funded through national and local public resources. This leveraging activity has a direct impact on the receiving villages and towns, especially in the poorest parts of the country. Piedras Blancas, a small hamlet (Canton) of around 300 families, is linked to four clubs in the United States, from whom they have received US$50,000. This amount was leveraged by resources from the National Social Fund for Local Development (FSDL) and the local Government. The contributions of each partner vary but are usually divided into matching amounts of one third each. The funds are mostly invested in infrastructure and basic services: schools, streets, public fountains, community centers, water supply or energy supply. These works can be defined and prioritized by the community. The municipality of Santa Helena ( inhabitants) is a provincial town where 25% of the families are receiving transfers from members working abroad. A local committee, composed of around fifty volunteers, is managing the resources received from their clubs abroad. Some of the works are fully paid by the remittances: some are co-funded by the local government and some are co-funded by the local government and the National Social Fund on a case by case basis. A Multiple use Civic Center was recently inaugurated and the Sports center is already functioning. Various sports fields and a swimming pool became the most popular facilities. The committees contributed to the campaign of the newly elected mayor, with the understanding that, if elected, he would co-finance the works proposed by the hometown committees and their local counterparts. One of the challenges of these movements, as stressed by the director of CARECEN is that hometown and local committees do not remain at the philanthropic welfare stage, but start to adopt an entrepreneurial perspective so that they can become agents of development in their hometowns. 18

19 DIAGRAM 4: El Salvador Transfers as part of GNP Source: Banco Central de Reservas, ECA Estudios Centroamericanos DIAGRAM 5: El Salvador Rate of Growth of GNP/Capita Source: Banco Central de Reservas, ECA Estudios Centroamericanos

20 3 CONCLUDING REMARKS The public and private sectors have viewed migration and the remittances generated as financial flows that they can capture and benefit from. With close to $US40 billion annually in remittances the Latin American region is one of the most profitable markets for financial institutions and money transfer companies. Family remittances and transnational linkages offer a wide array of developmental opportunities if proper incentives are created to increase the availability of capital and induce senders and recipients to invest in local development projects. While remittances remain family based, they are becoming a source of funding for local development. The transfers of resources from migrant Hometown Associations abroad have had a positive effect locally. More work needs to be done with a broad canvassing of HTA operations and activities in order to assess their real impact, particularly since transfers for funding local projects have a leveraging capacity. The investments are doubled or tripled by public resources. The key element is that the projects funded result from the initiatives of the migrants themselves and their families, strengthening a peopledriven process. Experiences from Mexico are, by far, the most advanced (in particular in Zacatecas, Guanajuato or Jalisco States) and those from San Salvador, are paving the way of an alternative mode of funding local development through pooled resources. Different stakeholders have different perspectives on the multiple urban challenges generated in the cities by large migration movements: regulation of land and housing markets, reduction of agricultural land held speculatively by migrants, new poverty profiles such as families that are not receiving remittances from the members abroad or urban violence resulting from migration patterns. Furthermore, civil society and NGOs are concerned about the rights of the migrants in the countries of destination and in the countries they have to cross, in many cases, illegally. The socio-economic impacts of migration have widened disparities, generated new poverty profiles, created new patterns of social exclusion, and in many instances fostered violence and youth gangs. The municipalities have become a field of innovation to address these challenges, although the examples are still limited in scope and, for the most part, isolated efforts. There is a critical need to document these local responses and disseminate them to cities affected by the adverse effects of migration. Further field research is needed to document the impact of massive investment in housing and its affect on land markets, property values, speculation, and new patterns of spatial segregation. 20

21 4 ANNEXE Micro-credit Program in Maracaibo, Venezuela Maracaibo is a city of approximately 1.7 million inhabitants, 68% of whom are poor. Despite its oil wealth, there is a proliferation of irregular settlements. There are 438 of these barrios, covering an estimated 60% of the city s area, in addition to 207 illegal divisions. Migrants, mostly from Colombia, are estimated to number between 300,000 and 600,000 in Maracaibo. The numbers fluctuate year to year and the children born to Colombians in Venezuela are considered Venezuelan citizens. A Municipal Mixed Fund providing micro credit (for home improvement and income generating activities) was established to give families, especially women-headed households of Colombian origin, access to credit. Compulsory savings are a key feature. In 2004, 20% of the applicants were non-venezuelan and 72% were women. This is not surprising since women heads of household need a modicum of security and space for their living accommodations and homebased income generating activities. The system is organized as a Public/ Private Partnership, institutionalized as an autonomous system for micro-finance called SAMI. The partners are the local government, the central government and a local NGO. It is expected that two private oil foundations will contribute additional resources to the Fund. The fund s management structure includes representatives of the local government of Maracaibo, two local NGOs and the borrowers once they have repaid their loan. 21