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Hearing of the Subcommittee on the Western Hemisphere of the House Committee on Foreign Affairs - Leveraging Remittances for Families and Communities


Location: Washington, DC

Hearing of the Subcommittee on the Western Hemisphere of the House Committee on Foreign Affairs - Leveraging Remittances for Families and Communities


DEL. ENI FALEOMAVAEGA (D-AS): Thank you, Mr. Chairman. I want to thank you for your leadership and for this initiative that you've taken into holding this hearing. I think it's very important and certainly to the members of our committee.

And I certainly want to offer my personal welcome to our distinguished witnesses that will be testifying -- who will be testifying here this afternoon.

Mr. Chairman, this issue is not a new issue and it's not just restricted to the Western Hemisphere. It's a worldwide issue. The question of sending remittances to families, people working in other parts of the world, it happens all the time. There's about a -- there's a Western Union office somewhere outward in the middle of nowhere, but the thing that I like, as my good friend from New Jersey has stated earlier, these funds are this -- these monies that are sent from families home goes directly to the needs and the benefit of the families.

You mentioned that, Mr. Chairman, that the amount of remittances that are being sent back home, Central and South America, is in the area of $62.3 billion. I can tell you as chairman of the Asia Pacific Subcommittee, I have an example of the Philippines alone -- I think they send remittances to their family, Filipinos who work all over the world, the Middle East and Africa and even in Central and South America. I think the remittances they send home -- somewhere well over $20 billion a year. And I think some 500,000 Filipinos who work in other parts of the world -- and for the benefit of these families.

I know my good friend, the gentleman from Indiana, has stated right outward in terms of the complications that we're faced with, the fact that we're talking about 12 million illegal immigrants who work here in our country. And I might also note that there's been a lot of misinformation going around, the suggestion that these 12 million illegal immigrants are from Mexico. It's not true. I think there's only about 5 million of them; the others are from Central and South America.

And secondly, I also want to note that we are now having problems now in picking citrus in agricultural farms in the country simply because of the crackdown that we're making on catching or putting these illegal immigrants either deporting them or just having them not working anymore. And I think that's another real major issue and it's always been said how many years now that we've had to confront with this issue of illegal immigrants. And the question is -- the other side of the coin, I say that on the other hand it's been a real blessing for the families of thousands -- hundreds of thousands of families who have benefited from this question of remittances.

I look forward to hearing from our witnesses this afternoon. And again, thank you, Mr. Chairman, for calling this hearing.


REP. FALEOMAVAEGA: You know, one of the shining examples of how much we've said so much about the positive effects that NAFTA was supposed to provide, but as a result of implementing the NAFTA treaty that no more of -- no more illegal immigrants. I mean, it would cause more people in Mexico to stay in Mexico because the economy, the free market system, globalization, the free trade and all of this -- well, it hasn't happened. And I was just curious what do you think of the factors that cause these immigrants of these -- migrant workers to continue coming to the U.S. and not stay? For obvious reasons, the Mexican economy is just not positive enough to say that it provides employment and jobs for these people rather than coming to the United States. What is your view on this?

MR. BONICELLI: Mr. Congressman, I think that free trade agreements are one very important step of solving the problem of immigration because of a lack of economic opportunity at home.

I would, if I can get away with it, lapse back in with the classroom and not be the AA for a moment and just say that I don't think that all the other steps have taken place across the region yet. I think that free market economics has been embraced in rhetoric but not completely in all the steps everywhere, and that's one of the reasons I've enjoyed my two years at USAID so far is continuing to work on those programs. I felt -- thought the rhetoric at the outset of NAFTA, both in the Bush and the Clinton administrations, was a bit overblown about solving all the problems. It was the very first -- a very important first step, but I think more has to be done for it to be as effective as it can.

REP. FALEOMAVAEGA: Free market economy assuming that also there's stability in these countries.

MR. BONICELLI: Absolutely.

REP. FALEOMAVAEGA: And that has not happened.

MR. BONICELLI: Absolutely.

REP. FALEOMAVAEGA: We can talk about Venezuela, we can talk about the fact that these countries and their economies just are not up to it. I think the beneficiaries to the NAFTA thing has been Canada and the U.S. have done very well, but when it comes to Mexico, it is not given -- the problem here -- even in our own country. Some states have benefited from NAFTA, others suffered. And I suspect in Mexico it's probably the same situation also for them.


REP. FALEOMAVAEGA: So when you say temporary stability of providing assistance to these families, the problem here is that you cannot put in something that is not there altogether. You have to take all factors into consideration. But I still insist and think that remittances has been a positive thing. The fact that it goes directly to the families, that governments are not involved, and I really think that while we look at the illegal immigration issue on the one hand, but in the other hand it has given tremendous assistance to these families, especially the poor families.

Thank you, Mr. Chairman.


REP. ENGEL: Mr. Faleomavaega.

DEL. FALEOMAVAEGA: Thank you, Mr. Chairman.

Gentlemen, we've got a $62,300,000,000 pot. That's remittances. Then I am glad that Dr. Orozco, you mentioned in the equation remittances and that of financial services.

I was very impressed, Mr. Armenteros, that your company services or provided some 500,000 people that made remittances and that you issued 15 million remittances. That's a lot of -- I'm curious, out of the $62.3 billion pot, how much goes to financial services?

MR. ARMENTEROS: How much goes to financial institution or --

DEL. FALEOMAVAEGA: Yeah, banking, you know, the servicing of the remittances that goes to Western Union or whatever --

MR. ARMENTEROS: Well, Dr. Orozco has all the exact numbers on that but we all know them. Ninety-three percent of remittances go through money remitters like myself. And there must be about 3(00) to 400 medium -- smaller, medium and bigger-sized remitters, including Western Union, Money Gram, which are the better known brands in the U.S., and there's tens of thousands, if not hundreds of thousands, of independent agencies which are outlets that retail remittance services. So I'd say about 7 percent go through financial institutions. That's on the send side, meaning 7 percent are retailed by financial institutions. On the receiving side, however, it flips. A much larger percentage like those --

DEL. FALEOMAVAEGA: I'm not a mathematician, Mr. Armenteros. I just want to know, out of the $62.3 billion --

MR. ARMENTEROS: Okay, sorry.

DEL. FALEOMAVAEGA: -- how much of it goes into the servicing of the 62.3 billion (dollars)? You know, 1 billion in financial services that go -- that -- in other words, how much do the banks get out of this whole thing?

MR. ARMENTEROS: The banks process out of the --

DEL. FALEOMAVAEGA: Whatever banking or group --

MR. ARMENTEROS: -- financial institutions --

DEL. FALEOMAVAEGA: -- that provides the financial services.

MR. ARMENTEROS: The financial institutions retail and process about 7 percent of the 62 billion (dollars), which would be -- what -- 4 billion.

DEL. FALEOMAVAEGA: Four billion?

MR. ARMENTEROS: Four billion out of the 62 (billion dollars).


MR. ARMENTEROS: And the reasons why they haven't been able to make deeper inroads are the fundamental obstacles that I wrote down there, in my opinion. But on the receive side, most of the remittances, a large portion of them, are delivered through financial institutions.



DEL. FALEOMAVAEGA: I'm just trying to figure what the financial services get out of this. Did you say about 7 percent was about -- what, 4 billion (dollars)?


DEL. FALEOMAVAEGA: Okay, that's not chicken scratch; that's not bad.

You mentioned, Mr. Armenteros, that there's a cultural bearing. I suspect that most of these migrant workers -- there is a cultural bearing. The fact is that right now in our country when you come here illegally, the cultural bearing is that you have violated the law and almost being labeled as a criminal. Now, you mentioned the contrast in Spain; they don't even care whether you're there legally or illegally. Am I correct on that?

MR. ARMENTEROS: No, no, they do care.


MR. ARMENTEROS: Absolutely, but they don't allow it to get out of hand. When -- as people immigrate into Spain, they've made strides, and they've kept ahead of the problem. And they've been able to -- if not all, a large portion of immigrants, they integrate into the labor force. They make them pay taxes. They give them worker permits. They let accounts be opened. So it's a more welcoming environments for immigrants.

DEL. FALEOMAVAEGA: Since we can't compare Spain to our country -- I mean, the numbers have always been so there's 12 million illegal immigrants, but I -- there's also been estimates between 12 to 20 million illegal immigrants living here in this country. So I just wanted just to ask you, when you say cultural bearing, some banks don't want to serve you. Here's the concern that I have --


DEL. FALEOMAVAEGA: If I were an illegal immigrant and I'm earning a bunch of money, I'd be very reluctant to go to see a bank about doing any transactions other than if you -- it's much easier if I were to go just to Western Union; they don't ask you any questions whether you're legal or illegal. They just sort of tell us where the village is, and they send the money.

MR. ARMENTEROS: There's a combination of that and there's a combination -- there's that combined with the fact that, like Dr. Orozco said before, banks typically -- and this is changing -- typically don't see as good business to bank the immigrant community. So they don't invest in it, meaning that few banks actually hire tellers and their signage and their locations are designed to serve this community. So it's a combination of those two things.

DEL. FALEOMAVAEGA: Would you say by and large the employers really have a great influence on some of these migrant workers to suggest what banks they go to? Or they know what banks are willing to service their financial needs, if that's a way to call it.

Am I correct on that, Mr. -- Dr. Orozco?

MR. OROZCO: I think the employers could have a main role in this -- for example, providing agreements with banks to do payroll deposit, direct payroll deposit into a bank account, even if it's a checking account or -- what they (call ?) it, a "checkless" account that doesn't have fees that they are taxing on the individual. You could have an important entry point, and some institutions are trying to get at that.

I think in general, banks would like to do business with migrants, but I think the banking culture in the United States has moved into too much corporate banking and away from the traditional way of doing banking 50, 60 years ago that is neglecting these migrant populations. And as the society is changing, this is going to affect the way we do banking in the future.

DEL. FALEOMAVAEGA: Well, I don't know if -- about being negligent in looking at a $62 billion pot that could be serviced.

I mean, as you said, some banks are willing to do it and others not.

In the midst of all that we've discussed, some of the issues, pro and cons, and the whole issue of remittances, do you gentlemen have any suggestions to maybe the Congress at least to address it by way of statutory requirement or any way to help alleviate some of the problems that you raise here?

The biggest problem I have is that remittances is almost an equation to illegal immigrants working in this country. Now, I'm curious when you say remittances because I would say the vast majority of remittances being sent to the families in these countries where they come from are produced by illegal immigrants and not necessarily those who are here legally.

I may be wrong on that, Mr. Chairman, but you gentlemen are aware -- I mean, do you have figures to -- would you say that the vast majority of the remittances are from legal migrants or workers working here in this country?

MR. OROZCO: To be honest, I don't look into it on purpose. I'm not interested to look at it. But what I can tell is the following two things. One is that the percent of remitters is similar depending -- is the same whether you are legal or illegal. So if you have 12 million undocumented population or illegal population, then take 70 percent out of that.

But the fact is that undocumented people are less likely to earn -- are more likely to have a lower income than people who are naturalized or legalized, so they are sending less on the aggregate. So, I mean, you can think 50 percent of the money is sent by illegal immigrants.


MR. SCHMITZ: I do think that varies very much on which community you're looking at because, for example, the Salvadoran and Honduran community have the TPS, temporarily protected status, which allows them to get a permit to be here and work. In other communities, that's not possible. And there, of course, the proportion of illegal immigrants is much larger.

Our experience here is difficult to tell. Once we service many migrants, we don't ask them for their visas, they just -- when they come to send a remittance. But the majority of all our clients are Salvadorans and Bolivians. The Bolivians have all been here for many years, and most of them are very well established and send relatively large amounts. And I would assume that of the Salvadorans that form about maybe 25,000 of our customers, the vast majority are here legally because they have the TPS status.

However, to your original question, I think there's a cloud about this whole issue of remittances -- legal, illegal immigrants -- serving them with financial services, giving them access to banks or not. And I think what would probably help everybody that is interested in this whole topic is to get an actual solid understanding of whether providing financial services to illegal immigrants creates any kind of risk to the security of the country, provides a risk of money laundering.

And I think the example of Spain is very interesting because the banks have, as Mr. Armenteros pointed out, created sub-entities that are specialized to serve these communities. And they are very often in the Hispanic neighborhoods, and they look very different to a bank branch. They are much smaller; all the staff are from these communities. And in Spain there's no requirement to ask for the visa status.

But overall, if you look at the situation in Spain, I would think that there's much more stability. There's much better data available. I think the government has a much clearer idea who's in the country, who's sending money. And overall, I think they -- also the situation of the migrants on the ground is much better because they can go to a bank. They can open an account. They don't have to be paid with a check. They don't have to pay check cashing fees and so on. So in my personal experience, I would think that --

DEL. FALEOMAVAEGA: If we perhaps -- if we could take the lead from Spain and maybe --

MR. SCHMITZ: Exactly, well I agree --

DEL. FALEOMAVAEGA: -- for better servicing, for more efficiency and --

MR. SCHMITZ: -- at least bring some clarity to the issue and maybe addressing what the actual risk is in serving migrants, because I think the banks are still tapping in the dark. They are not really sure is it an actual risk to their compliant procedures, or is it not? Sometimes the banks don't even know if they can serve migrants or not because there's no clear regulations. They don't know if they could accept a Matricula Consular or not. Do they -- would they need a Social Security number to open an account or an ITIN or neither? Can they use a passport from the home country?

DEL. FALEOMAVAEGA: Well, we have a very interesting situation, Mr. Chairman. I just found out that, you know, our Cubans, when they come, they don't care how you come. As long as you make it to the U.S. border, once you make it to the U.S. border, within one hour you get your papers because there's a little (quirk ?) in the federal law, Mr. Chairman, that allows Cubans some years ago, I think, in concerning them as refugees or whatever status that they receive, any Cuban that can come here -- don't care whether you come through Mexico or any part of the world -- as soon as you make it to the border, you declare yourself you're a Cuban citizen and within one hour, your papers are legal and you go visit your -- the unfortunate thing is a lot of the times our friends in Cuba you got to pay $10,000 to the person that is helping to transport you, whether through the Yucatan -- that seems to be the route they're taking now rather than coming directly to Florida.

They think it's closer to the Yucatan Peninsula, and then from there finding your way through the jungles and make it up to the Mexican border. And once you get there, just declare yourself -- present yourself with a passport saying you're a Cuban citizen and we have a law that -- I don't know if you're aware of that, Mr. Chairman --

REP. ENGEL: The Cuban Adjustment Act.

DEL. FALEOMAVAEGA: There you go. You think that maybe we ought to have something like that for our friends that might have a -- need help in that regard?

REP. ENGEL: Well, how many votes do you think we could get for it in this Congress, Mr. Faleomavaega? (Laughter.)

DEL. FALEOMAVAEGA: One and a half.

REP. ENGEL: Let me --

DEL. FALEOMAVAEGA: I just want to thank the gentlemen for their patience.

And I thought their testimonies were excellent, Mr. Chairman. And as suggested by our friends here, maybe we ought to look at the -- at Spain as an example in maybe how we could better facilitate some of the issues that we've discussed this afternoon.


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