08/20/2013 08:21 am ET Updated Oct 20, 2013

The Immigration Debate in the US Should Include Role of Remittances

While Congress has left town for August, the controversy over immigration reform continues to simmer, never far from the surface. The issue has generated debate since the introduction of the proposed bill by the so-called "gang of eight" in the Senate which would be the largest reform to the immigration system in decades. Indeed, for conservative Hispanics such as Marco Rubio and Ted Cruz, as well as for leading Democrats, immigration has become a high stakes litmus test for the future of their parties.

Yet one of the most important dynamics relating to the large numbers of foreign immigrants that live and work in the United States has gotten relatively little attention - that is, remittances. In the news media as well as the halls of Congress, topics such as border security, a "path to citizenship", the role of e-verify, and the structure of temporary working permits have dominated discussions. Yet the massive flow of funds from immigrants to their home countries is one of the biggest policy aspects - and political opportunities - of the push to reform the system.

This cash flow has an impact on a wide range of policy areas, affecting economic development in Latin America and creating new implications for our approach to development aid to the region. But it also has political ramifications within the US as well. For Republicans, for whom the current immigration debate is only further highlighting their already dire relationship with Latinos, championing the cause of immigrant remittances could be a way to open a new front in the debate. That is because the story of the increase in remittances is a textbook story of personal responsibility.

According to the Inter-American Development Bank, Latinos workers abroad sent over $60 billion to their families in Latin America in 2012, an increase of $300 million from 2011. The social development impact of this money becomes clear in comparison with USAID, whose contribution to Mexico is $68 million out of a total worldwide annual aid budget of around $24 billion. Mexico alone received over $22 billion in remittances. Thus, promoting development and reducing poverty through encouraging these cash flows should be an important policy concern for Democrats as well. This culture of saving and sacrificing for the future stands in stark contrast to the broader culture, in which the average savings rate is only 3.9 percent.

Remittances also directly impact the flow of undocumented immigrants across the southern border of the US. For most people, leaving their homes and families in order to venture into a foreign country with no guarantee of work and the constant threat of detention is not their first choice. Economic development and the expansion of opportunity in Latin America will encourage more of their citizens to remain at home, and relieve pressure on the US immigration system.

This has been a goal of development agencies like USAID for years, and these agencies have been a force for good in promoting such economic development and poverty alleviation in the region. But there is evidence that remittances work even better than direct aid, since they are more targeted to those most in need, and they are sent and received by individuals who understand better than the government what their families need and how best to leverage their money.

A recent study prepared jointly by the Inter-American dialogue, the Tinker Foundation, and the Pan American Development Foundation (PADF) highlights these dynamics. The report, entitled "Toward a model for a development alliance between the diaspora and the private sector: the experience in education" (available, in Spanish only, here), demonstrates how better coordination between immigrants, local citizens, and civil society institutions can produce dramatic improvements in welfare in countries like El Salvador, Honduras, and Costa Rica.

As the report states, "strategic alliances between migrants and the public sector have demonstrated the contribution to development. Perhaps the clearest case is that of the Mexican migrant associations that have banded together through the 3x1 program, which engages the three levels of government - municipal, state, and federal - in order to coordinate investment in a diverse array of social, economic, and political development projects."

Another example is that of ALCANCE, a project in El Salvador that brought together 21 migrant communities with a number of non-governmental organizations, the PADF, and the local private sector in order to improve the education system. ALCANCE benefited 77 schools and more than 2,000 students and adults in total, through investments in infrastructure, donations of books and other materials, and the organization of seminars to improve labor market skills.

These programs demonstrate the power of remittances in promoting development for Latin Americans in their own countries. And while remittance flows themselves are not government programs, experience indicates that governments can play a role in coordinating them in order to amplify their impact. This is the type of policy discussion that it would be worth having on both sides of the aisle as the immigration debate moves forward.