Revisiting Wages of Emigration or Wages of Sin

Nov 12, 2010 Features / Columnists, Peeping Tom

Professor Clive Thomas, a respected economist, has questioned the source of what he called the explosive growth in remittances in Guyana for the period 2004-2008. He has argued that the growth over this period cannot be attributed to prosperity levels in the Diaspora, but may be due to flows from organized crime.
It is certainly an area that needs examination. But one would also hope that the good professor would not also ignore other factors which may account for this explosive growth.
Firstly, remittances through money transfer agencies may not be a good choice for the movement of illegal flows, since a trail is left with these transactions. There are also limits to the sums which can be remitted on any one transaction without having to declare the sources of those funds, and the authorities within the developed world would have regardless been tracking those who frequently benefit from these proceeds. They will also be monitoring the large transfers.
While the growth of remittances in Guyana over the period may seem high there may be plausible, not necessarily spurious, explanations for this increase.
For one, the growth of reported remittances may represent greater capturing of previously unreported flows. Great portions of remittances in the past were not captured in official statistics because of the manner in which they were sent.
Persons working overseas found ingenious ways of sending money back to their relatives in Guyana. Often it was through cash remittances sent via friends or relatives who were traveling to Guyana.
With the increase in remittance companies offering attractive remittance fees, money formally sent in cash could now be channeled through these companies. This is certainly true for both the Caribbean and North American remittances. The money transfer agencies have not only allowed millions that were previously sent hand-to-hand to be recorded in official statistics, but it has also led to an increase in the funds being sent back since it is now easier for money to now be sent.
Previously you had to find someone who would be willing to bring the cash with them when they were coming to Guyana. Now it can be sent through a money transfer agency. The growth of these money transfer agencies have therefore helped to increase the recorded flows as well as the amount of money being remitted.
A second possible explanation is that the increase may be attributed to increased personal investments in Guyana. There is a form of reverse migration that is taking root in Guyana with funds being repatriated back home. Many overseas-based Guyanese spread their savings widely, including holding these funds in local banks. This has proven a wise decision considering the financial crisis that rocked America
Major sources of investments by non-residents are in land and housing. A great many overseas-based Guyanese have moved their savings into these areas, as can be seen by some of the very expensive looking buildings which can be seen along the Coast and which are owned by persons living overseas. This accounts for a great chunk of the transfers.
A third related explanation is the transformation of remittances in kind to remittances in cash. Many Guyanese households usually tell their relatives overseas that it is best to send cash, since things can be obtained much cheaper here. A great deal of the transfers in the past was in kind, but there has been a shift to increased monetary remittances and this has also helped increase the flows.
A strong case, therefore, can be made out that the increase in remittance flows can be explained in changes in the nature of these flows moving from undocumented flows to money transfers which are now captured, changes in kind transactions to cash transactions, and the movement of savings and earnings into the banks and investments in Guyana.
When these things are considered, the growth in remittance levels between 2004 and 2008 may not be at all attributable to the massive movement of illegal funds. This is borne out by the fact that the decline in remittances in 2009 was attributed to the financial crisis and not to a slowdown in illegal flows. Surely, if illegal funds were a principal subset of remittance flows, then there would have hardly been close to 10% contraction in 2009.

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