Recently, the Minister of Economy said that according to American Community Surveys 2019, 60.1 million Hispanics reside in the United States, of which 2.1 million are Dominicans, of these 1.6 million are native-born migrants and 1.1 million belong to the working age population. These migrants are mainly responsible for the remittances that their families and the economy as a whole receive every day.
From May 2020 to August 2021, the Central Bank has been reporting on a monthly basis, highlighting the growth of remittances in the Dominican economy and when the performance of a month is lower than the previous one, then the news note highlights the year-on-year or quarterly growth, or the narrative that best suits to highlight the expansion of remittances as a positive news item.
As many authors have said, the history of mankind is the history of migrations, motivated by climate, war, political conflicts, subsistence, poverty, better life expectations and economic crisis, are part of the causes that move them. In the Dominican case, modern migration has been associated with economic crisis and in search of a better and secure standard of living.
Therefore, it is not good news that the number of Dominicans residing in the United States exceeds two million, nor should the issue of remittances be a source of pride, because its main cause lies in the failure of public and private policies with an exclusionary bias, which did not allow these nationals to stay and develop in the land where they were born; but on the contrary, the departure has had an individual character.
We do not dispute the importance of remittances. At the microeconomic level, almost 12% of Dominican households receive remittances and they are useful to support the consumption of the basic food basket and other expenses such as housing rent, health, and undergraduate and university studies. Remittances help to reduce overall poverty by 2.0%.
In macroeconomic terms, the US$8,219 million of remittances that entered the country in 2020, on that occasion, as in previous ones, supports the balance of payments, on the current account side, the international reserves -offering support to imports, stability to the exchange rate, confidence to investors-, and also, it is useful as an anti-inflationary effect, by reducing the risk of currency depreciation.
In spite of these positive micro and macro effects, remittances in dollars are a liquid currency that the Dominican economy receives at zero cost, as the country does not have to make any type of investment to generate the amounts that the exchange market trades every day, especially from the United States and from Dominican migrant workers residing there.
While remittances enter the Dominican Republic at zero cost, the local economy, in order to generate exportable products and foreign exchange, invests and assumes climate, exchange and pest risks, etc., in the tourism sector, in order to attract dollars, investments are made, sometimes with negative environmental impacts, fiscal incentives are granted, such as tax exemptions, and foreign investment is also attracted by policies with innumerable facilities.
In the race of which sectors generate more foreign exchange to the national economy, although exports lead with an amount that exceeds US$10,000 million per year, remittances are close behind, exceeding US$8,000 million per year and it is estimated that it could exceed US$9,000 million by the end of 2021.
With respect to the other sectors generating foreign exchange with costs, tourism and foreign investment, the former producing over US$7 billion and the latter, exceeding US$2.5 billion, both per year and also with amounts lower than those generated by remittances from Dominican migrant workers.
Remittances to the Dominican economy have shown a growing trend over the last decades. Particularly, focally, in recent years, by 2016 they amounted to US$5,260 million, then in 2018 to US$6,494 million, in 2020 to US$8,219 million and as of August 2021 it stands at US$7,031 million. From 2016 to 2020 remittances have grown by 56.2%, equivalent to an increase of US$2,959 million.
At the same time, remittances also show a growth in their participation in the gross domestic product (GDP), by registering a contribution of 7% in 2016, then 7.6% in 2018, then 10.4% in 2020 and it is estimated that by the end of 2021 it will reach 11% of the GDP.