Today the Committee returns to the question of financial literacy, which was the focus of two days of hearings earlier this month, and takes up the issue of remittances. Remittances are the payments sent home from workers, generally immigrants, living in the United States to family, friends, and communities in their country of origin. Those sending remittances, remittors, are often subject to exorbitant costs; if remittors had more financial education they would be able to send remittances at a fraction of the costs they currently pay.
The particular focus of our discussion today will be the findings of three recent studies. One, conducted by Sergio Bendixen of Bendixen and Associates, entitled "Survey of Remittances Senders: U.S. to Latin America," was based on interviews of Latino immigrants, conducted in November-December of last year. The other, entitled "Attracting Remittances: Market, Money and Reduced Costs" and "Enabling Environments? Facing a Spontaneous or Incubating Stage" were commissioned by the Multilateral Investment Fund of the Inter-American Development Bank (IDB) and were prepared by Dr. Manuel Orozco in connection with this weeks IDB's conference week on the subject of remittances. These reports are just now being released, and we are very pleased to have Dr. Orozco among our witnesses.
We will begin by hearing from Representative Luis Gutierrez, whose long-standing concerns about the remittance market are reflected in his bill requiring full disclosure of all costs to sending a remittance, and we will conclude our discussion with two distinguished academics who are experts in the field: Dr. Susan Martin, Executive Director of the Institute for the Study of International Migration at Georgetown University, and Dr. Raul Hinojosa-Ojeda, the founding research director of the North American Integration and Development Center at UCLA.
Immigrants to the United States have traditionally sent financial assistance in the form of remittances to family members who remained in their country of origin. Until recently, however, the phenomenon has not been systematically studied and its implications have not been fully realized.
The 2000 census shows that 30 million people in this country are foreign born, the most in our nation's history. More than 40 percent immigrated in the 1990s. The vast majority - 22 million - are citizens or legal residents.
They make a vital and integral contribution to the nation's economic and social structures. Some 15.4 million immigrants, accounting for more than half of the immigrant community, come from Latin American countries. The 2000 census shows that the Hispanic population of the United States stood at something over 32 million, representing 12 percent of the U.S. population.
As the population has grown, the volume of remittances has increased dramatically. It is estimated that over $20 billion is remitted annually from the United States to Latin America, and there are substantial remittances to other areas of the globe as well, notably the Philippines. The rapidly expanding market has enormous significance, both to remittors in the U.S. and recipients abroad. To cite just a few examples: the value of remittances far exceeds U.S. official development assistance to all of Latin America; and in five countries - El Salvador, Haiti, Jamaica, Nicaragua and Ecuador - it represents more than 10 percent of GDP. In Mexico, which in 2001 received an estimated $9.2 billion in remittances -- making it by far the largest recipient country -- the dollar value of remittances exceeded both agriculture and tourism revenues.
Our focus today, however, is the domestic aspect of the remittance market. We will consider the market from a remittor's and also an institutional perspective, and we will do so against the background of the testimony presented at our earlier hearings on financial literacy. Remittors tends to be low wage earners, with modest formal education and relatively little experience in dealing with this country's complex system of financial institutions. Like all people who must make important financial decisions about limited resources, remittors must have the financial literacy that enables them to grasp the crucial details of their transactions. But that requires that they be fully informed about the options available to them for sending money home - what fees are charged, what exchange rate is offered, what alternative remittance methods are available, and what percentage of the money sent will actually be received. In a $20 billion market, the IDB estimated between $3 to $4 billion was lost in fees and other transaction costs.
The reports before us review those options, examine trends in the market and review transaction fee structures. There is recent evidence showing that fees have declined somewhat as the market has expanded, and this is certainly an encouraging development. But there is clearly much to be done. This is one of the important questions we look forward to reviewing with our witnesses, to whom we now turn.