This week, the Salvadoran Central Bank reported that remittances (the money immigrants send home to their home country) fell to $2.6 billion (down 10.3%) in the first nine months of 2009, as compared to the same period last year. Since the mid-1990’s remittances have played an important role in El Salvador’s economy. An estimated 1/3 of El Salvador’s population lives in the US either legally or illegally, and a large percentage of them send money home to family members or community organizations. From 1998 until 2008 remittances grew threefold to $3.78 billion/year (17% of El Salvador’s GDP), making the workforce El Salvador’s largest and most profitable import. During this same period, 22% of all El Salvadorans grew to rely on remittances to help them survive.
Economists and other social scientists have pointed out that remittances shape many aspects of Salvadoran society. The increase in disposable income has increased consumer spending, while serving as a disincentive for working low wage jobs. Some communities have seen a dramatic decline in the production of traditional crops such as corn, rice and beans because farmers receive enough remittances that it is not worth their time to work the fields. In many communities, remittances have even created new class divisions – those that receive remittances, and those that do not. Those that receive remittances often own one or more homes, have a car, computer, new clothes, and other goods that were previously considered luxuries, while those that do not either remain poor or depend on the spending habits of others.
The global economic crisis, however, has severely impacted the amounts that Salvadoran immigrants have been able to remit back home. Over the past year, the unemployment rate among foreign-born Latinos living in the US has grown from 5.8% in 2007 to 8.0% in 2008. In California, unemployment rates have reached 12.4%, due to the large number of immigrants employed in the construction and tourism industries, which have suffered during the economic crisis.
The decrease in remittances has not only affected family members that once received them, but the entire Salvadoran economy. In one example reported by the Inter Press Service News Agency (www.ipsnews.net), Rosalia Marquez’s beauty salon in Chirilagua, San Miguel has seen her income drop 60% of the last six months. She commented that “revenues have really shrunk; if there are no remittances, there is no work.” There are even stories in which families in El Salvador who used to receive remittances are now helping their unemployed relatives weather the economic storm by sending money back to the U.S.
While they remain an important part of the Salvadoran economy, the recent financial crisis and current high unemployment rates are more reminders that remittances are not a long-term solution to El Salvador’s economic development issues. While some Salvadoran families have taken advantage of the extra capital by building new business and making other investments, others have not managed their money so well.
Voices on the Border 