Overseas remittances subject of hearing
By Dianne Solis
Dallas Morning News
The $72 billion flow of money from immigrants back to their homelands was in the spotlight yesterday on Capitol Hill as the central source of foreign capital for many countries.
Assistant Treasury Secretary Wayne A. Abernathy told the House Financial Services Committee that the U.S. government is working with the private sector and the governments of recipient countries to bring down transmission costs, which have eaten as much as 20 percent of the value of the transaction.
"It is funding that almost by definition gets into the hands of those who need it most — the families of those whose hard work earned the money," Abernathy said.
Actual flows are believed to be higher than $72 billion, but governments have trouble counting the money, Abernathy said. And those flows could increase if there were more competition and disclosure of exchange-rate fees and commissions, some experts said.
The hearing was held to assess consumer fairness, disclosure and accessibility within the growing remittance industry.
Some lawmakers, including Rep. Barney Frank, D-Mass., and Rep. Luis Gutierrez, D- Ill., have sponsored legislation that would direct U.S. financial regulators to issue rules requiring financing institutions or money transmitting businesses to disclose information about fees and exchange rates, including the exact amount of money the recipient will get.
(In Hawai'i, there are more than 100 Filipino remittance service firms. There are no specific licensing or bonding requirements to meet. Overseas Filipinos send an estimated $6.4 billion annually to relatives in their homeland.)
"For more than 28 million foreign-born men and women in the United States, helping out family members and loved ones abroad is a way of life," Gutierrez said. "However, far fewer of those dollars, it turns out, are making it into the hands of their relatives abroad than consumers are to believe, and far more of those dollars are ending up in companies' coffers."
In Mexico, the flow of immigrant money is expected to top $12 billion this year. In the first half of 2003, it was a larger flow than that from the direct foreign investment by corporations in Mexico.
India receives about $2 billion more in remittances than Mexico.
Abernathy said it is wrong to describe the migrant money as going toward "nonproductive purposes," as some in economic development circles have argued. One large bank, for example, has estimated that 17 percent of remittances in the Mexican market are used to finance home improvement and construction, Abernathy noted.
Abernathy nevertheless warned of the potential to overregulate the market to the point that it would force transmitters out and thus reduce remittance flows.
