Earlier this year I wrote about the $300 billion-per-year international remittance industry, the channel by which the bulk of some countries’ gross national product is generated. How will new attempts to discourage Latin American migrant workers and nationwide housing woes affect the flow of funds in the Americas?

We all know that the sub-prime nightmare has affected everything housing-related, from direct home loans to mortgage-backed debt used to finance mergers and acquisitions. Of course, the glut of houses on the market and the inability of even the most qualified buyers to find willing lenders has brought home building to a screeching halt.

And, according to some estimates, Latin American nationals or naturalized US citizens occupy one third or more of all construction jobs in the United States. This puts a deep dent in earnings, as construction jobs pay relatively highly compared to other labor sectors. Most importantly, building jobs Stateside certainly pay more than home-country wages and unemployment.

 The Inter-American Development Bank says that in 2006, ten Latin American countries credited over 10% of GDP to remittances. This statistic may even undercut the reality, since GDP (gross domestic product) refers to what is produced within a country and many remittance-heavy economies choose to use GNP (gross national product) instead.Business intelligence group InfoAmericas estimates that, conservatively, a quarter of a million Hispanics in both formal and informal fields will lose their jobs as a result of the housing bust.

Bear Stearns said in a recent report that not only the housing trouble, but also vigorous immigration crackdowns are contributing to declines in remittance growth, especially to Central American countries.

Here in the Mid-Atlantic, especially in and around the nation’s capital, immigrants from El Salvador, Nicaragua, Guatemala and Honduras abound. In Northwest DC these days it’s almost easier to get a Salvadoran pupusa for a snack than it is to get a hot dog. Bear Stearns says that a slowing of remittances from the US will hit El Salvador and Guatemala hardest.

Declines in the amount of money arriving at the other end of the wire may, in turn, drive more Salvadorans and Guatemalans northward, through the dangerous deserts of Mexico and, ironically, into rowhouses just a few miles from where the federal government is trying to engineer a halt to migrant flows.

Of course, remittances are big business for companies like Western Union, which shifted deftly from the dying telegraph industry into money transfers as the telephone took over last century. The company, which trades on the NYSE under the ticker symbol WU, is under pressure from immigrant advocacy groups that allege that Western Union is even less socially responsible than Wal-Mart, whose name is mud in most labor circles.

Wal-Mart, one group states, reinvests $2.30 per every $100 of profit in immigrant communities it serves. Western Union, says advocacy group TIGRA (Transnational Institute for Grassroots Research and Action), puts only 41 cents back for every Benjamin it takes in.

The World Bank opined this week on the remittance issue in another region of the world, saying that banks and money transfer services like Western Union are charging 15 to 50 percent fees for transfers from Australia and New Zealand to outlying Pacific Islands (a common migrant flow in Oceania), when they should be more around 1 to 5 percent per transaction.

The World Bank actually uses the US-Mexico pipeline as an example of progress, saying that transaction costs between the two countries have come down by 60 percent over the past eight years. This can be attributed to better regulation, product innovation, and good ol’ competition, officials say.

So what do immigrant advocacy groups here say about being an example for the rest of the world? Improvement certainly doesn’t mean that we don’t have farther to go.

But as far as remittances are concerned, fees will rarely be the first thing on the minds of those sending and receiving funds across national borders. Workers need jobs to generate income for themselves and faraway family alike. What we are seeing in the housing market might not be just the bursting of a bubble in real estate, but the beginning of a far less appealing migration option as well.

Regards,

Sam Hopkins