World Banker and His Cash Return Home

Please take the time to read this most interesting item from the New York Times on the experience of emigrant workers and the issue of family remittances at http://www.nytimes.com/2008/03/17/world/asia/17remit.html?pagewanted=3&ref=world

Somewhile back I submitted another New York Times article on emigrant workers and family remittances. This issue is also discussed from a Nicaraguan point of view in my blog at http://aynicaraguanicaraguita.blogspot.com/2008/02/emigrant-workers-keep-homeland-afloat.html

Dilip Ratha’s experience and contribution to understanding this phenomenon is indispensable to developing a clear understanding of the complexities of this process.

I would appreciate the opportunity to interview Ratha about the methodology used to calculate remittances.

The reason is simple. I have spent a lot of time over the last 25 years away from Nicaragua. But I always sent money back to my family. Most of it was not sent though Western Union or the banks (they take a big chunk out of your apple). Most went in the wallets of kind friends who agreed to take modest sums from Canada to my family. How is that kind of remittance captured in World Bank calculations? I know from personal experience in my own barrio in Managua that recipients of remittances deeply resent the rip off of businesses like Western Union and the banks.

I recently transferred a modest sum of money from Canada to my own bank in Managua, and was charged $25 at that end, $15 dollars by a transfer bank in Miami, and another $15 by the local bank! The only word I know for that is parasite – in this case three of them.

I think our Nicaraguan government should nationalize the process of transfer of remittances and reduce to real cost the price of making money transfers. Given that we have a free trade agreement with the USA, Nicaragua should set up a network of agencies in that country to handles low cost (non-profit) family remittances. And banks here should be banned from levying charges against their own clients. They already reap profit from the interest earned from these funds.

Felipe Stuart
Managua




http://www.nytimes.com/2008/03/17/world/asia/17remit.html?pagewanted=3&ref=world

March 17, 2008

World Banker and His Cash Return Home
By JASON DePARLE

SINDHEKELA, India — An important man from the World Bank recently arrived in this isolated village, where monkeys prowl rutted roads, rain pours through the school roof and the native son who achieved the most did so by going away.
Lessons about global poverty were waiting, but so were his sisters’ chapattis. Migrant and migration scholar, Dilip Ratha was home.

No one has done more than Mr. Ratha to make migration and its potential rewards a top-of-the-agenda concern in the world’s development ministries. And no place has done more to shape his views than this forgotten hamlet, where he studied under the lone streetlight and began a poor boy’s improbable journey to the front ranks of an elite field.

“When I think about the effects of migration, I think about Sindhekela,” he said.
Working from his office in Washington five years ago, Mr. Ratha produced the first global tally of remittances, the money that migrants send home, and stunned experts from himself on down with the discovery of their size. Gathered from a trickle of hard-earned cash, the sums now exceed $300 billion a year.

In subsequent work, Mr. Ratha, 45, has pushed to reduce money-transfer fees and increase the productivity of the money that is sent. Allies say his work has prompted projects in governments and beyond that could benefit millions of people. Skeptics argue that if migration brought development, Mexico would be Switzerland.

A soft-spoken man whose seeming diffidence disguises his drive, Mr. Ratha is gripped by his cause. “Some people say I paint too rosy a picture of migration and what it can achieve,” he said. “But I realize the importance of dollars coming in because I know poverty firsthand.”

If he is enthusiastic about migration, he has lived it on especially favorable terms. He has never crossed borders illegally or worked with dirty hands. He commands a salary 100 times higher than he would if he had never left home. With it, he has educated two younger siblings, paid for a nephew’s life-saving operation, and built a big house for his father.

Spanish: One thing is to believe in God, another is believing in a monetary sect!

Limits of Giving
Yet a visit to Sindhekela last month also suggests the limits of long-distance giving and the migrants’ psychological strains. Old friends want money. A younger brother has squandered his help. An effort to upgrade the local high school has met with ambiguous results.

His father, at 78, worries about dying alone. His older sister frets that he eats with a fork. Both speak Sambalpuri, meaning his Venezuelan wife and his American sons, all English speakers, cannot talk to them.

Globe-trotting technocrat, village boy made good, Mr. Ratha is like many migrants torn between two worlds and fully at home in neither. “On bad days, I do feel lonely in a way that I can’t explain,” he said.

There are about 200 million migrants worldwide, supporting as many if not more people at home. That suggests that remittances may reach almost a tenth of the world’s population: India ($27 billion), China ($26 billion) and Mexico ($25 billion) are the leading beneficiaries. But in relative terms, small countries gain the most, with some increasing their national incomes by more than 20 percent. Egypt gets more from remittances than it does from the Suez Canal.

Most of the money is spent on consumption — food, clothing or a birthday bash — which leads some economists to discount its impact on development. But Mr. Ratha argues migrants would invest more if they had better options. And he regards higher consumption among the poor as a very good thing.

“It’s not just about economics,” he said. “Having someone who’s doing well abroad brings confidence to the family. They can hold their heads high.”

Holding heads high has been a challenge in Mr. Ratha’s corner of India. Per capita income in the state of Orissa is about $400 a year, half the national average. The neighboring village, Khariar, made international news two decades ago when a hungry woman raised about $3 by selling a child. Sambalpuri, his first language, lacks a written script.

By local standards, Mr. Ratha’s family enjoyed a comfortable life. His father, Gopal, had a primary school education and a state job as a land assessor. As a Brahmin, he was expected to avoid physical labor, but he bought a speck of land that a sharecropper worked. The Rathas had little cash but plenty of rice.

While Mr. Ratha’s older sister left school after third grade, he grew up inexplicably hungry for books. His father saw him with a promising future as a village postmaster. But high test scores brought a scholarship to a two-year college, and his father felt obligated to find the money for room and board. “I felt like I was putting a tremendous burden on him,” Mr. Ratha said.

More scholarships took him to a university in Delhi, a 42-hour train ride, where he studied under Marxist economists and practiced English by watching Clint Eastwood films. He wanted to attend an American graduate school but lacked the application fees. Teaching fellowships sustained him at the prestigious Indian Statistical Institute until he finished his Ph.D.

The Global Migrant
By then, a younger brother, Artatrana, was following his path — he earned two Ph.Ds. Their younger sister, Rina, got a master’s degree. When Mr. Ratha finally borrowed the money to reach the United States, he became Sindhekela’s first global migrant.

Other than his brother, a professor in Minnesota, he is thought to be its last.

“We are always citing the example of Dilip Ratha,” said his high school teacher, Mrutyunjay Tripathy, who now runs the school. “Our students are astonished that this young man from Sindhekela flies around in planes.”

When Mr. Ratha reached the World Bank in the early 1990s, most economists saw remittances as small private sums that were irrelevant to development. After years of sending money home, he took a closer look.

Given the scorekeeping at central banks, it was an exercise in forensic accounting.
The International Monetary Fund said the Philippines received $122 million. Mr. Ratha produced an estimate 51 times higher: $6.2 billion. His tallies, first published in 2003, showed that remittances, once dismissed as the equivalent of a rounding error, were nearly three times greater than the world’s combined foreign aid.

“That was a bombshell,” said Kathleen Newland, a founder of the Migration Policy Institute, a Washington research group. “Putting it in that context made people see there was this enormous flow of money into the developing world. Dilip really is the person who put remittances on the map.”

In subsequent work, Mr. Ratha has argued that the importance of the money exceeds its sheer size. Unlike foreign aid, it cannot be skimmed by potentates. Unlike investors who flee crises, migrants increase their giving during hard times. The money is directed to the needy. And Mr. Ratha contends it is well-monitored, too, by intimates on the sending end. “It comes with a lot of goodwill, advice, knowledge and punishment if necessary — keeping in mind the welfare of the recipient,” he said.

When officials from more 150 countries met in Brussels last summer, remittances figured high on the agenda. Skeptics smell a fad.

“Remittances: the New Development Mantra?” asked an article by Devesh Kapur of the University of Pennsylvania. He sees the money as a palliative that, while at times helpful in easing poverty symptoms, leaves underlying structures unchanged. “If I ask can you name a single country that has developed through remittances, the answer is no — there’s none,” he said.Some critics fear the focus on remittances obscures broader concerns about migration, including the potential costs to children left behind. “Behind every remittance, there’s a separated family,” said Elizabeth Gibbons, a senior official at Unicef.

Some see the money as a pittance that deflects attention from migrant exploitation. “It tends to justify the way the world economy is being restructured for the benefit of a small elite,” said Raul Delgado Wise of the University of Zacatecas in Mexico.

Mr. Ratha agrees that migration is wrenching and the economic forces that drive it are often unjust. But, “Once people decide to migrate, benefits can occur for local development — that’s the point,” he said.


From Thinker to Doer
Mulling a leap from thinker to doer, he has drafted plans for an “International Remittances Institute,” to provide cheaper ways to send money — fees often exceed 10 percent — and more options for investing it. Easier access to banks, for example, might improve migrants’ savings rates and expand local lending pools.

Back in Sindhekela for the first time in three years, Mr. Ratha went from being a migration expert to mere migrant again, with the attendant tensions. He was annoyed that the money he sent his father for medical treatment went to a relative’s wedding. His father was annoyed that Mr. Ratha refused to honor his caste by wearing a sacred thread.

Father and son had long wrangled over the house that Mr. Ratha had built as a gift. The son is proud of the big master bedroom. His father finds its size off-putting and sleeps on a living room cot.

Mr. Ratha gave the village high school a new classroom, which he intended as a science hall. The state never sent the equipment, and the room houses some aging computers of uncertain utility.

Mr. Ratha, who named the building for his long-deceased mother, professes no donor’s remorse. “The building has served a great purpose,” he said.

He does worry that his generosity may have hurt his half-brother, Tarun, who spent the money on gadgets and a motorcycle and did not finish high school. At 23, he is unemployed and the family blames remittance dependency. “I think it has affected his drive in a negative way,” Mr. Ratha said.

At the same time, his sister Rina said that without his support she would not have earned her degrees or married an architect. “Whatever I am, I am because of him,” she said of Mr. Ratha.

The headmaster wanted another classroom. A neighbor needed medical care. Mr. Ratha needed no reminder that his 9-year-old’s tuition at a Washington private school, $26,000, would support 65 villagers for a year.

Still, he was surprised at the recent progress that Sindhekela had made. The road had been widened and partly paved. Three cellphone towers rose overhead, and the children all wore shoes. In a village once thick with beggars, he saw only one.

There were a variety of possible explanations, including an irrigation project that expanded local harvests. It was no surprise that Mr. Ratha emphasized another: India’s vast internal migration, which was luring villagers to distant cities and bringing rupees home.

“I understand the costs of migration,” he said. “There is a cost to not migrating, too.”