However, while remittances tend to be much less volatile than other flows, even exports, the same survey shows that the value of those remittances to the region dropped 11% in 2009. This was largely due to huge job losses in some sectors of the US economy that traditionally attract immigrant labour, such as construction. Spain is undergoing a similar downturn in construction. Japan, which is also an important source of remittances to Brazil and Peru, has seen declining industrial production as export demand has slumped.

Historically, remittances to Latin America are not only large relative to the size of local economies, they are also large relative to other capital inflows. They are comparable in size to foreign direct investment flows and greater than official development assistance, for instance. And total remittances have grown since 1990 (see graph). Remittances accounted for less than 0.1% of GDP in 1980; by 2007, that proportion had risen to 1.5%.

Latin American Economic Outlook 2010 is available at www.oecd.org/bookshop, ISBN 978-92-64-07521-4