Cash-Strapped Immigrants Rely On Family Abroad

Immigrants in the United States often send money to their families back home. In fact, in some immigrant neighborhoods, money transfer offices are as common as banks and nail salons.

Last year, money transfers totaled $305 billion worldwide.

But there is an interesting new phenomenon fueled by the financial crisis: money flowing the opposite way. With the downturn in the economy, some families are sending money to their relatives in the United States.

Washington Heights is a largely Dominican neighborhood in upper Manhattan. La Nacional, a money-transfer company that caters mostly to people from the Dominican Republic and Mexico, looks like nothing much from the outside. It could be an ordinary check-cashing store.

But underneath this small office is a basement that runs the length of several buildings. Sitting in cubicles, more than 40 employees are arranging money transfers for clients all over the world: Latin America, Eastern Europe and the Middle East.

The company has more than 60 retail stores, more than 800 agents and last year it handled more than 3 million transactions. And yet, if you are white and Anglo, says Alan Friedman, president and CEO of La Nacional, "you may not even be aware this kind of business exists. We are not the largest company in the world, and we did $781 million last year. Western Union's numbers are just humongous, and nobody realizes it."

Dilip Ratha, an economist at the World Bank, says "remittances in 2008 added up to about $305 billion, three times the amount of all official development assistance put together. In Sri Lanka," he adds, "remittances are larger than their tea exports, in Egypt remittances are larger than the revenue from the Suez Canal."

Ratha says the United States is the largest source country, with at least $50 billion flowing out annually. The No. 2 country is Saudi Arabia.

The downturn in the economy has slowed the flow of money from the U.S. to other countries, but unexpectedly, there has been an increase in money flowing in reverse. La Nacional says it's gone up about 15 percent to 18 percent this year, and the company has now hired three people to do these "reverse remittances."

Ana Molina, a supervisor in the incoming remittance department, finds that her phone is constantly ringing. Speaking rapidly in Spanish she says that when she was first hired, "there were at most 30 to 50 of these reverse transfers a day; now there might be 70 to 100 from the Dominican Republic alone."

Money-transfer services are popular with immigrants because they are cheaper than transfering money from most banks, and more importantly, neither party to the transfer has to have an account.

Every Friday, Hector Hernandez walks into the offices of La Nacional. He is from the Dominican Republic, but his mother now lives in Puerto Rico.

"I used to work in a clothing factory, but I lost my job five months ago," he says in Spanish. He used to send money to his mother every month, but now that he is unemployed, his mother is sending him $50 every week. "I was good to her and now she is helping me. I am looking for a job so that I can start sending her money again."

It takes only a few minutes and Hernandez has his check.

It's very hard to estimate the amount of reverse remittances. Ratha of the World Bank says this is especially true "when money is coming from poor to richer countries and sometimes the recipients in the countries may be undocumented."

But Ratha says there is evidence that ever since the economic crisis, immigrants have been drawing down their savings accounts — the amount of money they hold in their country of origin.

Back at the offices of La Nacional, Rosa Sanchez, a single mother with two children has just gotten some money from her relatives. She says she hasn't been able to pay her rent because of the poor economy.

"Food prices have gone up," she says. "Clothing for my children, electricity, gas, everything is much higher now. You are spending more and you have less."

When asked why immigrants who lose their jobs don't just go back to their home countries, Molina of La Nacional says, "Even with a part-time job here, you can make ends meet. If I go back, I won't find a job. That's why people stay."

And in a down economy, these reverse remittances are tiding some people over.

This piece was produced for broadcast by Marisa Penaloza.

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