QUEENS COLLEGE

CARIBBEAN EXAMINATION COUNCIL CARIBBEAN ADVANCED PROFICIENCY EXAMINATION INTERNAL ASSESSMENT for Caribbean Studies

Remittances can steer Guyana into sustainable development

NAME OF CANDIDATE: CANDIDATES NUMBER: TEACHERS NAME: SCHOOL CODE: TERRITORY: YEAR OF EXAMINATION:

AdelajaDalrymple 090041 Ms. Thandeka Percival 090041 GUYANA 2012

Abstract
Being a relatively young country, Guyanas economy is still growing and brimming with potential. Its full potential has not been achieved, thus persons leave and send remittances to help back home, the greatest hurdle in this is the management of the remittances. In this study, the focus was upon those that greatly depended on remittances just to try to live each day in normality, the poor. Poverty is witnessed and experienced all over Guyana but only secondary research was done so as not to make persons uncomfortable by asking them of their social status. In my findings, remittances help more than the income of the people and with better management, they can be used to help Guyana develop.

Introduction
Many persons leave in search for a better life but not only for themselves but also for their family who remain behind. They send home remittances to help with the situation and then the recipients of it are faced with life changing decisions. They must choose between making investments for the future and trying to get-by on a daily basis. However the latter is of most importance to them. Remittances that enter the country are mostly used for survival and the rest is just kept for later. My study tries to find if these monies can be used to help these people now and for the future. In my growing years, I have seen and experienced poverty of all forms and my greatest wish is to see it greatly lessened. Being a Christian, I can only ask of that because Jesus Christ once said, The poor will always be with you.

Hypothesis
A simple hypothesis was formulated for this study so as to encapsulate it as easily as possible: Remittances can steer Guyana into sustainable development.

Literature Review

Immigrants seeking economic opportunities often send moneyreferred to as remittances home to their families. (Congressional Budget Office, 2005) In Guyana this can be known as progs or simply getting money from outside. Remittances were considered private and were only among family members and close friends but now, remittances are now on the minds and agendas of most governments, members of the civil society, the international community at large, and, to some extent, even the private sector. (Migration Policy Institute, 2006) Some US$167 billion is the reason for remittances not to be exclusively a household topic. They exceed official foreign aid or foreign investment as sources of external funds (Congressional Budget Office, 2005). Each country had its own value of remittances which depended on the number of migrants, the countries they migrated to, whether they had family and its size amid much others.For example, Brire et al., using Dominican data, find that migrants destination, gender, and household composition are crucial factors in determining the magnitude of remittances. Durand et al., on the other hand, cited the migrants wage and job situation, the number of dependents at home, marital status, and age of the migrant as crucial determinants of the amount of remittances. Several microeconomic studies have shown that the income level of the migrant and his family are also reasons to consider. The average amount remitted to a spouse is 44 percent greater than the amount sent to other persons and also, having a bank account increases the amount remitted by about 9 percent. (Migration Policy Institute, 2006). In comparison to their economies, smaller poorer countries tend to receive much more remittances. In accordance with the Migration Policy Institute, Guyana received 22% of its GDP as remittances in 2006. Several microeconomic studies also indicate that the education and the income level of the migrant and his family are the main determinants of the amount of remittances. The Congressional Budget Office explains that the main reason that people migrate is to send remittances. From living in Guyana, this statement seems much too obvious and is of little importance but what that remittance does is of much more importance. Many sources expound on what remittances are used for but the recurrences include poverty alleviation and financing for education, health and entrepreneurship. The research by the Migration Policy Institute in 2007 shows that remittances directly augment the income of recipient households; household survey data show that remittances have reduced the poverty headcount ratio (percent of population

below the national poverty line) significantly in several low income countriesby 11 percentage points in Uganda, 6 percentage points in Bangladesh, and 5 in Ghana. A source of evidence that shows the work of remittances was done was done by Lopez-Cordova in Mexico. He observed that within communities that receive remittances there is a greater literacy levels and higher school attendance among 6-14 year olds and also that remittances are associated with reduced infant mortality. Other studies have also shown that remittances provide capital to small entrepreneurs, reduce credit constraints, and increase entrepreneurship (Migration Policy Institute, 2007). With such positive effects by remittances it is quite questionable why they are not used more extensively used in steering development in a progressive direction. With the population of Mexico around 100 million and Guyana a mere 750,000, the positive effects would express itself as immensely more.The values used for Mexico are of one municipality and if applied to Guyana on a national scale the effect is quite substantial. It is clearly seen that remittances encourage development in education, health and standard of living. But, this positive effect causes a backlash to itself. As migrants send money and the recipients become more comfortable, they are less likely to work. Immediate comfort blinds them from seeing that development is progressive and continuous. Settling too long at a standard that cannot be sustained is only a recipe for disaster. Studies suggest that the more comfortable a migrant gets, the less likely he is to send money; and if children are present, the chances decrease even more. (Congressional Budget Office, 2005) Furthermore, the evidence also suggests that households tend to save a larger portion of remittance income than they do other sources of income, providing a source of capital for investment (Adams, 2002). The Congressional Budget Office reported that in 2005, countries with rural areas that receive remittances had decreased rural output. For a country such as Guyana that depends on agriculture, this would devastate our economy more. The use of remittances in Guyana is mainly as a supplement to income. The previous paragraphs show how much remittances can help in alleviating poverty, making people more comfortable. But the main issue is the use of this money for development. Excess remittances are either saved or used in small scale entrepreneurship as reported by the Migration Policy Institute in 2007. This is the cause of the retard growth and development because the excess money just sits there, the recipients become more laid-back and the migrants send less and less because they are also

becoming more comfortable. The lack of policies, initiatives and programmes which can further encourage the use of remittances aspects of development causes our country to suffer. With proper management of the remittance resource, development can become something much more attainable.

Although far from the panacea they are sometimes purported to be, remittances, as the literature clearly shows, generally have a positive impact on key aspects of development, including human capital formation, investments, poverty reduction, and macro-economic stability and, in some cases, even on social and political change. Depending on the policies key stakeholders, particularly governments, are willing to implement, remittances can be a potentially powerful tool for development. (Migration Policy Institute, 2006).

Method
Multiple secondary sources were used and cited in conducting this research.The objective of this was to reduce the occurrence of persons feeling embarrassed or uncomfortable in the event that personal information was necessary. All material used can be found in the References section of this document.

Results

This bar graph was compiled from values and information from the World Bank and Migration Policy Institute.

Discussion
The trend seen from the bar graph shows a significant increase in remittances to Guyana from the year of 2000 to 2007 but just minor fluctuations from 2007 to 2010. To account for the 2000 to 2007 period, we have to consider the 85% of tertiary students (World Bank, 2011) that left the country in 2000. The initial drop at 2001 shows that jobs were being newly acquired and thus pay a bit low but as time passed through the years, their pay increased, promotions attained and better jobs sought out. But the devaluation of the US dollar and also the declining value of the Euro to the US dollar since the last quarter of 2008 have also resulted in the lowering of remittances and thus the drop in 2008 and 2009 (Guyana Journal, 2009). However, there is an increase from 2009- 2010 indicating that either migrants stepped up their remittances or the US or Euro dollar had however slight increases to their currencies. There is a perception that no matter how large remittances may be they may still be inadequate to ensure that Guyanese on the whole enjoy a decent standard of living (Consumer Concerns, 2002). And thus the main question to this statement can be simply stated as, what are remittances used for? According to the Stabroek News editorial on Thursday November 21st, 2011, this money (remittances) is used primarily to help meet the immediate needs of family members back home, some of whom live on the brink of or below the poverty line. But can this one source be used to justify? Here is another statement from Consumer Concerns column of Stabroek News by Eileen Cox on November 24, 2002 (9 years prior to the previous statement). She states that without the remittances from the United States, consumers would be in dire poverty. These statements can be proven true from the literature used in the literature review which has numerous statements that can attest to this: Household survey data show that remittances have reduced the poverty headcount ratio

(percent of population below the national poverty line) significantly in several low income countriesby 11 percentage points in Uganda, 6 percentage points in Bangladesh, and 5 in Ghana. (Migration Policy Institute, 2007). They also lead to an increase in investments and the reduction of poverty, particularly

within recipient households. (Migration Policy Institute, 2006)

At first thought, this may seem more talk than reality but the evidence is there. The exchange rate is now $G190 to the US$, the charges for electricity have risen, there are elderly persons in need of expensive medication, and there are numerous persons injured in mini-bus accidents and unable to receive compensation. Consumers in Guyana are living without hope of seeing a turn for a higher standard of living. The lucky consumers, who own their own homes, find that incomes are too low to keep their homes in good condition (Consumer Concerns, 2002). As remittances help with alleviating poverty, the tendency for the recipients interest in work decreases. The main disadvantage of these transfers was listed as an ongoing dependency syndrome, which has tended to characterize an increasing percentage of remittance recipient households in Guyana. In addition, this explains in part a growing disincentive to work among that stratum of the population who regularly receives remittances. (The Two Edged Sword, Kaiteur News, 2007). The research done by the Migration Policy Institute in 2006 also shows that Using aggregated panel data for 113 countries, the authors find a negative effect of remittances on growth after controlling for the investment/GDP ratio, regional dummies, and other control variables. The authors blame this negative association on the moral hazard problem remittances creates. Income from remittances may permit remaining family members to reduce their work effort that can then reduce the labor supply. Remittances can help propel this country forward but with really good management. In proper management, as poverty alleviation increases persons are more able to use their money and with this, they can be encouraged to work and invest to better increase their standard of living. The current policy focus on leveraging remittance use for development and on strengthening the infrastructure supporting them will certainly enhance this potential. However, remittances, just like any other form of capital transfer, do not operate in a vacuum. A sound socioeconomic climate within migrant-sending countries, development-friendly migration policies within both sending and receiving countries, and extensive policy dialogue and coherence within and among governments are critical components that will make remittances work for development (Migration Policy Institute, 2006).

Conclusion
The limitations of this research were not many but were analytically important. Many of the values used were from formal media sources of remittances. Thus, the informal is simply unknown. However, it is believed to be so much larger as stated by the Congressional Budget Office in 2005. This leaves room to question, how many people do receive remittances, how much do they receive and is that money being used efficiently. As information gathering on this becomes better, another research should/can be done to further understand this topic. Primary sources were not used because of the sensitivity of the data that was needed. Many persons would have felt embarrassed in releasing such information. The utmost security of confidentiality is essential for primary sources so as to have a thorough study of this topic.