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As coronavirus layoffs surge in richer countries, poorer ones lose vital remittance payments

A money-transfer bureau in Amman, Jordan.
A money-transfer bureau in Amman, Jordan. (Amel Pain/EPA-EFE/Shutterstock)

CAIRO — Osigan Caseres lost her job as a maid in this city and no longer sends home $300 each month to her daughters in the Philippines to buy food for her eight grandchildren.

In Somalia, Asha Mohamed Ahmed no longer receives the $400 her daughter used to provide from working at a Minneapolis hotel to cover the family’s monthly bills.

And in Mexico, Rosy worries how she will afford to buy medicine for her diabetic mother without the money her brother used to send before being furloughed at an Idaho ranch.

They are all economic victims of the novel coronavirus. As hundreds of millions of people around the world grapple with job losses, business closures and lockdowns, many are no longer able to help poorer relatives in developing nations whose lives can hinge on these payments.

 “No one wants to hire me now because of the coronavirus,” Caseres, 47, said. “I am worried for my family as much as I am worried about how I am going to pay my own rent.”

Billions of dollars in remittances from wealthier nations to poorer ones may be vanishing, threatening the welfare of millions of families globally and the health of their countries in the months ahead, economists say.

Many Latin Americans and Africans depend on remittances from relatives in the United States. Egypt and other Middle Eastern nations, meanwhile, attract millions of Asian migrant workers, who send home significant shares of their earnings. After the United States, the United Arab Emirates and Saudi Arabia are the world’s largest sources of remittances, much of the money flowing to Asian nations led by India, China and the Philippines, according to World Bank data.

Caseres came to Egypt eight years ago with the goal of helping her family. Since then, she has never missed a monthly wire transfer — until last month when the European families for whom she worked left the country to escape the virus. She is hoping to persuade her landlord to delay the collection of the monthly rent, praying that the crisis will end soon.

“I don’t know what’s going to happen,” Caseres said. “All I can do is just pray to God.”

Nearly 6,000 miles away, on the Philippine island of Mindanao, her daughter Jey was also praying. She had a dollar in her pocket, she said in a telephone interview, and she was considering pawning her cellphone to get money to feed her 2-year-old.

“I can’t buy my daughter any milk,” she said.

Crucial for survival

The Philippines dispatches 2 million workers across the globe every year, and in 2019, $33.5 billion in remittances poured in — a record high representing one-tenth of the country’s gross domestic product. The loss of this vital source of foreign currency could stagger a country that does not attract much foreign direct investment.

And if laid-off workers overseas are forced to return to the Philippines, this could severely test its economy and government services. Already, hundreds of Filipino workers aboard cruise ships — one of the industries hit hardest by the pandemic — have returned home to high unemployment and a lack of medical and social protections.

A lockdown on half the country has affected about 500,000 jobs, according to the nation’s labor department, putting everyone from jeepney drivers to salespeople out of work.

Across Latin America, too, there are signs of stress.

 Manuel Orozco, an economist with the Inter-American Dialogue, said he expects remittances to fall between 7 percent and 12 percent in 2020, compared with the previous year.

In 2018, the last year on record, remittances to Latin America and the Caribbean were worth $85 billion. In El Salvador and Honduras, remittances accounted for about 20 percent of the GDP, according to the World Bank. In Guatemala, it was 12 percent.

On Monday, with Mexico on the brink of economic crisis, President Andrés Manuel López Obrador called on migrants in the United States to keep sending remittances to their relatives. “We know they are also going through a difficult situation, but they should not stop thinking about their loved ones,” he said.

In the Mexican state of Michoacán, economist Jerjes Aguirre Ochoa estimates that 50 percent of the state’s 4.5 million people are the beneficiaries of remittances. Even before the coronavirus, Mexico’s economy had begun to contract, making the remittances especially important for many families.

 Rosy, 33, who lives in Michoacán, said she has been surviving mostly on remittances sent from four brothers and a sister who live in the United States, especially her brother Pedro who tends ranch animals in Idaho.

 “I spoke to my brother a few days ago, and he said that he is no longer going to be able to send us money because his employer is furloughing him — for how long? — until this virus is over,” she said, on the condition that her last name not be used because her relatives in the United States are undocumented.

Rosy said she needs the money to buy food and medicine for her diabetic mother. One of the medications costs about $1.50 per pill. “I am more concerned with the economy than what they tell us about the virus,” Rosy said.

Losing a lifeline

The breadth of the pandemic’s economic shock is being felt around the world, and it is not possible to compensate for the loss of remittances from one country with those from others.

“Even remittance source countries have been impacted, and perhaps even more so than recipient countries,” Dilip Ratha, lead economist for migration and remittances at the World Bank, said in an email. He added: “Remittances are expected to decline sharply during and after the COVID-19 outbreak.”

The World Bank has previously documented how remittances have helped alleviate poverty in low- and middle-income nations, enhanced nutrition, contributed to better childhood education and helped reduce child labor. All those gains could now take a hit.

“The loss of remittances is a loss of a crucial financing lifeline for many poor families and has a direct impact on nutrition, health and education outcomes, which will in turn affect human capital formation,” Ratha said.

A vulnerable country

Somalia, long racked by civil war, is among the most vulnerable of countries.

 A recent study found more than half of urban Somalis received remittances from abroad, and a significant portion of them said that without the money, they wouldn’t be able to afford food, education and health care. Somalis, mostly in the United States, Europe and Australia, have sent an average of more than $1 billion to Somalia every year, more than the country receives in aid from foreign governments. Remittances make up nearly a quarter of Somalia’s GDP.

Most Somalis working abroad are employed in low-wage jobs — such as being hired as taxi drivers and retail workers or for domestic positions — that were among the first casualties of the pandemic, said Laura Hammond, a professor at SOAS University of London and author of a study on remittances in Somalia.

 Logistics issues

Adding to the problems is that many money-transfer networks have shut down, and “so the question of how you get money to your relatives in Somalia, even if you have it, may be a challenge for many people,” Hammond said.

Because of instability and a traditionally cash-driven economy, Somalia lacks a formal banking system — and Western financial institutions have steered clear, citing risks. That means almost all of Somalia’s remittances are transferred in the form of cash on flights from banking hubs in Kenya and the United Arab Emirates. With the closure of Somalia’s airports because of the pandemic, the remittance flow has all but stopped.

“There is simply no cash coming into Somalia,” said Guleid Osman, chief executive of the Somali Bankers Association. “It is an enormous challenge despite only having a few covid-19 cases in Somalia. In a nutshell, we are facing a very critical moment, and we haven’t gotten a solution yet.”

This sudden halt has left those who usually receive money from abroad in a tight spot, while Somalia’s money traders, who process the remittances, say they are facing financial ruin. “Most of our customers are withdrawing money from their accounts, and we are running out of cash to give them,” said Dahir Hassan Abdi, who runs a money-trading business in Mogadishu.

After her daughter lost the Minneapolis hotel job, Ahmed said the family was left without financial support. Her husband, who once was the family’s breadwinner, has been ill for years.

Ahmed said in a telephone interview that she felt lucky that schools were closed in the city of Hargeisa, where she lives with five of her children, so she wouldn’t have to pay their fees or suffer the indignity of taking them out of classes.

But as each day passes, her worries deepen.

“We can’t provide the basics of life to our kids anymore,” she said.

Bearak reported from Nairobi. Sieff reported from Mexico City. Regine Cabato in Manila, Gabriela Martinez in Mexico City and Heba Farouk Mahfouz in Cairo contributed to this report.

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