Miami EFE).- Senders of remittances from the United States lose each year more than 2,200 million dollars (2,002 million euros) due to the “lack of transparency” in the payment chain, according to a report released on the occasion of the International Day of Family Remittances that is celebrated this Friday.
A report from the Wise platform highlights the damage caused by this lack of transparency for millions of Hispanics in the US who send remittances to their families, especially in the case of Mexico, which is the main recipient of the more than 70,000 million of dollars (63,700 million euros) that, according to Wise, immigrants sent in 2022 from the United States, the largest issuer of remittances in the world.
At a global level, with 61,000 million dollars (55,510 million euros) Mexico is the second country that receives remittances in the world, only surpassed by India, with 111,000 million dollars (101,010 million euros), according to data from the World Bank corresponding to 2022, the year in which a total of 647,000 million dollars (588,770 million euros) circulated, 8% more than 2021.
Diana Ávila, in charge of Banking and Expansion at Wise, stressed that this lack of transparency does not help to achieve the goal of the Sustainable Development Goals set by the United Nations, among which is the commitment to reduce the cost of remittances by 3% or less by the year 2030.
The executive explained to EFE that this process is going too slowly and that in the United States the current costs have been above 5% in the last 3 years and for this reason it is important that “Governments support this goal so that remittances can have a more positive impact.
As the report explains, the cost of a money transfer basically consists of an initial fee and a currency conversion fee. In practice, “that second component remains hidden from consumers, as it is included in an inflated exchange rate that most people are unaware of.”
Ávila therefore suggested that “all industry providers commit to using an exchange rate with a real-time reference point, provided by reputable and independent sources, central banks or other government entities.”
In the same way, he proposed that for the sake of transparency the operators are obliged “to subtract the charges from the amount sent, instead of adding them above”.
“By doing this, quantities shipped, rates, and quantities received would be standard metrics that consumers can use to compare providers in the same way,” he added.
The inflationary effect
In a report released on Wednesday, the World Bank predicted that globally at the end of 2023 remittances will total 656,000 million dollars (596,960 million euros), this represents a growth of only 1.4%, due to the fact that the Economic activity in the countries of origin of the remittances will weaken, “which will limit employment and salary gains for migrants.”
“In the post-COVID period of slower economic growth and falling foreign direct investment, remittance inflows have become more important for countries and households, given their resilience as a source of external financing,” the Bank noted. World.
The multilateral organization also believes that “one of the most important factors that lead to the high prices of remittances is the lack of transparency in the market.”
The report by Wise, an international currency transfer platform, highlights the effect of inflation on remittances and how the money sent in 2022 is in practice worth less than the previous year.
“By adjusting the volumes of 2022 for inflation and expressing the remittance flows in terms of 2021, a decrease in value of 3.7% is calculated in 2022,” explains the document, which forecasts a reduction in the value of about 6.65% by 2023.
Ávila highlighted the “significant impact” that remittances have on the economies of developing countries.
According to the Inter-American Development Bank (IDB), in the countries of the so-called Northern Triangle (Guatemala, Honduras, El Salvador) remittances represented 22% of their GDP in 2022, while in the Dominican Republic they constituted 9% and in Mexico the 4 %.
“Remittances are a lifeline for hundreds of millions around the world, but most people don’t know what they are really paying to send, spend or receive money internationally,” the executive highlighted.