Abstract One 2007

GLOBAL

DEVELOPMENT STUDIES

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Volume Four Winter 2006-Spring 2007 Numbers 3-4.

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Theme: Global Labor Migration and Emerging Trends in Development Finance: An Assessment of the

Economic and Social Impact of Migrant (Worker) Remittances in Central America and the Caribbean

BETWEEN HARDSHIP AND THE LOCAL ECONOMY IN LATIN AMERICA

Manuel Orozco

Inter-American Dialogue

1211 Connecticut Avenue, NW

Washington, D.C. 20036

Published Online: February 10, 2017

ABSTRACT

This study assesses the capacity and willingness of Latin American economies to effectively absorb remittances into their productive base. Although remittances overall have a positive impact on households and local economies, their effect on long term growth and sustainable development depends on the reaction of these economies to foreign savings. The absorption of remittances into productive activities depends on the structure of the economy in question, how the supply side responds to the demand of services, and the existence of an enabling environment that can stimulate economic activities associated with remittance flows. In particular, the effect of the local economy should be strongest in five key areas: finance, education, health, housing, and insurance.