Do remittances help or hurt El Salvador?

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El Salvador recently became the 11th country to sign a compact with the US Millennium Challenge Corporation. Marcela Sanchez at the Washington Post considers whether the $461 million agreement will reduce Salvadoran dependency on an annual diet of $2.8 billion in remittances. From her article over the weekend:

Carlos Castro, a Salvadoran community leader and owner of a Hispanic specialty supermarket in Northern Virginia, is dismayed that El Salvador now has to import workers from other Central American countries because some Salvadorans don't see a need to work and rely instead on monthly checks from relatives abroad. He further laments the consumerism that has Salvadoran immigrants working hard at tough jobs to pay for "a pair of the latest name-brand shoes" demanded by their kids back in El Salvador.

A World Bank remittances expert, Pablo Fajnzylber, had this to say in an online chat last month:

In fact, we find that poor families in most of the Latin American countries for which we have data, when they receive remittances, they spend a higher percentage of their income in human development, that is, in education and health--than families with similar levels of income and demographic characteristics that don't receive remittances. So, in practice, remittances are used for human development, and we find kids from families that receive remittances stay a longer number of years in school, and their families also have access to better quality health services, so there is, in practice, naturally a positive effect on human development.

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