Immigrant Remittances as a Source of Productivity

By Marcela Sanchez

In recent years Latin America has seen reduced inequality, a burgeoning middle class, and good economic governance that helped it recover from the latest recession sooner and better than others. But for all of its advances, the region still struggles to produce goods and deliver services more efficiently. In fact, over the last 40 years the region’s productivity growth has been dead last in the world.

There are many reasons for this productivity gap but top among them, according to a new book by the Inter-American Development Bank, is the lack of credit. Simply put, businesses that want to streamline and take advantage of new methodologies and technologies haven’t had access to the necessary financing to do so.

The recent recession has only exacerbated the problem. Total credit growth in the region dropped by more than three-fourths from 17% in 2008 to 4% in 2009. In terms of traditional mechanisms of investment, improved productivity in the near term does not look bright. Read more