Business as Usual in Guatemala

Santa Catalina Arch, Antigua, Guatemala. Photo © Sanket Mohapatra/World Bank

I recently made a presentation on the impact of the financial crisis and our outlook for remittances in 2009-10 at a conference on improving central bank measurement and procedures on remittances organized by CEMLA and the Banco de Guatemala on September 8-10. My colleague Jacqueline Irving presented on a global survey of central banks.The sessions and interactions with the participants made me aware that central bankers are not just interested in measuring remittances accurately, but are thinking about a range of issues that affect both remittances and migration—ranging from how exchange rate movements can create incentives to send remittances for investment motives, to intra-regional and bilateral migration flows.
 

One of the issues that many central banks are struggling with is how to adapt to the new definitions introduced by the IMF Committee on Balance of Payments Statistics as part of the forthcoming sixth revision to the Balance of Payments Manual (see Remittance Compilation Guide). While the new definitions are conceptually sound, there are several practical difficulties: 

• First, personal remittances are now based on residency status, instead of the earlier one based on migration status. In principle, these transfers from “residents” to “non-residents” include those by natives (e.g. charitable donations abroad) in addition to transfers by migrants to their family and friends.  
   
•  Second, it is not easy to estimate the component “compensation of employees” as the gross earnings of non-resident workers less their travel and transport costs, taxes, and social contributions. Computing these requires information on wages, living costs, sector of work and other information on short-term migrants from household or labor force surveys. Many seasonal and cross-border migrants who sometimes lack legal status may not be captured in surveys.
   
•  Finally, there is also a risk of double-counting flows, as it may be difficult to identify transfers made only by residents (and exclude non-residents) in the data collected from money transfer companies and banks.  

CEMLA is making an effort to help Latin American central bankers with the remittance statistics. More help is clearly needed to transition to the new definitions.  

Something that drew my attention in a presentation was the status of China as the largest recipient of transfers from Russia to non-CIS countries through money transfer operators (MTOs) and post offices in 2009 (see remittance breakdown by country). Perhaps more surprisingly, the average transfer to China was nearly double the average for non-CIS countries and more than four times that of CIS countries. It is likely that some of these transfers reflect small-value payments related to trade and investments. Nonetheless, this issue merits more investigation.

Street hawker in Antigua, Guatemala.     Photo© Sanket Mohapatra/World Bank

The host country, Guatemala, is incredibly rich in terms of history, culture and environment. We got a chance to make a brief visit to the historic city of Antigua, a small city of about 30,000 people about 30 miles from Guatemala City (the capital with more than 2 million people). Antigua is the former colonial center of Central America. It was destroyed by an earthquake in the 1700s and was completely rebuilt, but somehow managing to retain an old-world charm. The street hawkers selling handicrafts are business-savvy with tourists – one of them (a little girl) bargained with a colleague for an extra dollar saying “Business is business!”

Some of the sights that I would have liked to see, but could not because of lack of time, are the Mayan pyramids, a UNESCO World Heritage site, and the volcanic “black sand” beaches on the country’s Pacific coast.  

Main square, Antigua, Guatemala. Photo © Sanket Mohapatra/World Bank

Despite its cultural heritage, Guatemala with an average per capita Gross National Income (GDP) of $2,450 in 2007 is significantlly poorer than the average Latin American country. Some 5-10 percent of its people are abroad, mainly in the US, and it received about $4.4 billion in remittances in 2008, which is about 13 percent of its gross domestic product  ( see data). Guatemala’s dependence on remittances underscores the challenges, and also the opportunities, in leveraging the benefits of migration for development. Collecting more accurate data on remittances is a good start!