# **II. Data and methodology**

# _II.1 Data_

The dramatic increase in remittances observed at the global level over the past few years has been mirrored in Latin America. In fact, officially recorded remittances flows to the region have increased more than twenty-fold since 1980 when remittances amounted to about $1.9 billion to close to US$50 billion in 2005. These trends have placed Latin America (together with East Asia and the Pacific) at the top of the ranking of regions by total amount of remittances and more clearly by per capita remittances received. Moreover, according to World Bank 2006 on current trends remittances to the region could reach about US$75 billion in 2007. While this estimate is likely to be on the high side of what one could expect, it nevertheless highlights the fact that a collapse in remittances does not seem very likely in the near future. In other words, it is not unrealistic to assume that remittances are here to stay, at least in the short run.

Within Latin America, remittances are particularly important in some countries. For example, they represent more than 50 percent of GDP in Haiti, a ratio that is the highest in the world, and between 15 and 20 percent of GDP in Jamaica, Honduras, and El Salvador (see figure 1.A). Similarly, in Guatemala, Nicaragua and the Dominican Republic remittances are between 10 and 12 percent of GDP. The importance of those flows can also be illustrated by comparison with other private capital flows. Thus, in Guatemala, Honduras, El Salvador and the Dominican Republic, remittances are equivalent to respectively 14, 4, 3 and 2 times FDI flows. Even in Colombia and Ecuador, where in relative terms remittances are lower, remittances represent respectively 197 and 112 percent of FDI.

On a US$ basis, the Latin American country with the highest absolute remittances flows is Mexico, which received almost $22 billion in 2005 (about $18 billion in 2004, as reported in figure 1.B). This would represent 45 percent of total flows to Latin America in that year ($48.3 billion) and would make Mexico the largest world recipient in 2005. Other countries with substantial flows are Colombia and Brazil with flows of respectively $3.8 and $3.5 billion in 2005, and Guatemala, El Salvador, the Dominican Republic and Haiti with $2.5 billion on average. Also worthy of note are Ecuador, Honduras, Jamaica and Peru, where remittances averaged about $1.5 billion in 2005. Finally, on a per capita basis the country with the highest level of remittances would be Jamaica with approximately $550 per capita, followed by Barbados with about $400 per capita and El Salvador with flows of approximately $350 (see figure 1.C). The average for the 28 countries being considered here would be $128 per capita per year, but that amount increases to $270 among the ten countries with highest per capita remittances – a group that also includes the Dominican Republic, Haiti, Antigua and Barbuda, Guatemala, Mexico, Honduras, and Trinidad and Tobago.

The data just described reveal the importance of remittances in the different Latin American countries. However, if interest centers on the characteristics of those receiving remittances the BOP data described above is not adequate and one has to resort to other sources. In this regard, the natural candidates are nationally representative household surveys. A problem with this alternative is that not all the Latin American countries have 6