What the world needs is to introduce true diversity in its financial architecture.

Sir, I refer to “The world needs a new fin­an­cial archi­tec­ture” by Michael Krake, the exec­ut­ive dir­ector for Ger­many at the World Bank.

What if, keeping the UN, World Bank and IMF, we instead reform these institutions? As is, these are managed and governed by bureaucracy autocracies. 

November 2004, at the end of my short two-year term as an executive director in the World Bank, FT published a letter in which I wrote: “Our bank supervisors in Basel are unwittingly controlling the capital flows in the world. How many Basel propositions will it take before they start realizing the damage they are doing by favoring so much bank lending to the public sector (sovereigns)? In some developing countries, access to credit for the private sector is all but gone, and the banks are up to the hilt in public credits.”

I had often expressed this at the World Bank Board but, those colleagues who understood what I referred to, and nodded in agreement, could do nothing. How could they, they were nominated by governments and most expected, and needed, to return to the government. What did not exist was real diversity. Not diversity based on gender or race, but diversity based on interests, life experiences and needs. 

Then I often suggested substituting some on the current executive directors with e.g., a plumber or a nurse; or at least to give a place at the board to that migrant community that, by means of its remittances, provided development countries with much more financial assistance than the multilateral financial entities could ever dream to do.

Now 2024, if I had the blessing to again be at that board of directors, I would drive my fellow directors to despair by, over and over again mentioning: “Give me ten seconds, I want to see what my friend ChatGPT opines on this.”

Would, “Without Fear and Without Favour” FT, be willing to publish a letter on what ChatGPT thinks?

http://voiceandnoise.blogspot.com/2006/05/world-bank-needs-to-go-truly-global.html

http://subprimeregulations.blogspot.com/2004/11/some-of-my-early-public-opinions-on.html

@PerKurowski 

No remittances without representation!

Sir, you write “Poor government plagues Central America”, “Central America needs a bold gesture from the US”, FT April 22.Those migrants who often see no choice in life than to depart, with their family remittances produced their efforts far away from home, too often only help to keep in power those who caused them to depart.

An ambitious process such as that one referred to by FT, requires time to acquire political feasibility, and moments of sharp internal divisions might not be the best moment to find it.

In this respect I argue that to help the migrants acquire much more political representation in their homelands, would be a better place to start.

And the migrants sure have economic ammunition they could use. For some of these countries the GDP they help generate in e.g., USA, is larger than the whole GDP registered in their respective homeland.

The Honduran migrants chase a more reachable American dream, so as to be able to chase a more unreachable Honduran dream

Sir, Jude Webber writes: The scope of Wilson Flores’ American dream — to send money home to his mother and younger siblings, and eventually to go back to Honduras and open a shop — is modest.” “Honduran migrants chase the American dream” October 31.

It is a sad dream. Even if Flores manages to get into America and get a job, the money he will send home to his mother and younger siblings, will also be helping to finance the permanence in power of the system that made him migrate in the first place, and so he might never be able to go back and realize his Honduran dream.

I was an Executive Director at the World Bank, 2002-04, representing, among other, Honduras. There I did what I could to remind everyone that when compared to the remittances sent home by the Central-American migrants, all other support by donors and multilateral institutions were peanuts. In fact I repeated whenever I could that for instance what the Honduran migrants earned gross in the US, was more than the GDP of Honduras, which should make you wonder sometimes where the real Honduras is.

And I protested loudly when by means of diaspora bonds many tried to capture even more of the migrants’ savings, to finance their governments even more. 

On top of it all, those Honduras migrants had/have much less influence in their homeland than foreigners…and so I frequently argued “No remittances Without Representation.” 

If host nations, like the United States wanted to reduce the flow of migrants, one way positive way would be to help the migrants gain political power in their homelands, so as to help them create the conditions that could allow them to return… and live their Honduran dream. As an absolute minimum the migrants should have a sizable representation in their respective congresses or parliaments.

Down the line, if a majority of the citizens of a nation have migrated, like 51%, and if they suddenly wanted to take back their country by democratic powers, or even with force, would that be classified as foreign intervention, as an intromission into a sovereign’s domains?

Sir, more than a decade later, these sincere concerns I had, are sadly not longer just about my friends from Honduras or El Salvador, they are much closer home; they are about my landsmen the Venezuelans. For a starter what would now be happening in Venezuela, without family remittances?

@PerKurowski

Remittances that help family and friends to survive, sadly, usually, help keep in power those who forced migrants to leave their homelands.

Sir, Gideon Long (and Vanessa Silva) report “Migration has also helped Mr Maduro to stay in power. The UN estimates that 2.3m people — 7 per cent of the population — have left Venezuela since 2015. Many are prominent opponents of the regime and while their voices are still heard from exile, they are no longer in Caracas orchestrating protests.” “Venezuelans display resilience in face of hyperinflation” August 25.

But how many millions Venezuelans are kept alive by the remittances from their emigrant family members or friends? Several millions? So that clearly helps the Maduro government to hold on to power much more than the absence of some prominent (but also until now quite ineffective) opponents.

Fifteen years ago I served as an Executive Director in the World Bank. My Chair also represented nations from Central America like El Salvador and Honduras, which had millions of migrants working abroad, primarily in the United States, and from where with great sacrifices, they constantly sent their families vital monetary assistance.

As much as I admired these emigrants, I abhorred knowing that their remittances were also helping to keep in power those who were basically responsible for them having to emigrate.

For instance if we assume that migrant workers remit 20% of what they earn, then according to remittance data supplied by the World Bank, in 2008 and with respect to Honduras, we could calculate Honduran migrants gross earnings abroad, representing 122% of Honduras GDP. And so, in economic terms, where is really Honduras?

Time and time again I push for the idea that, as a minimum minimorum thank you for providing their homelands with these lifelines, the migrants should at least have an important representation in their respective general assemblies. That way they could at least try to change the realities so as to be able to go back to their homelands, before they forgot these. “No remittances without representation”.

We often hear about the dangers that brain-drain could represent for these countries. I always thought heart-drain to be much worse menace.

@PerKurowski

The remittances immense economic importance is rewarded with minimum political relevance

Sir in reference to your “Survival lessons for developing countries” July 15 and that discusses
the vital economic importance of remittances for developing nations I would like to contrast that to their almost non-existent political importance.

For instance, in the case of Honduras the remittances signify 25% of the GDP of Honduras. If we assume that the migrant workers remit 20% of what they earn we can then calculate that their gross earnings represents 122% of Honduras GDP. And so, if we divide the 122% by the net 75.5% GDP that was produced domestically, in Honduras, then we have that the Honduran migrant workers outside Honduras produce a bit more than 1.6 times what is produced in Honduras.

In other words it is the Honduras migrant workers that with immense sacrifices carry their poor homeland on their shoulder but yet no one asks their opinions in relation to the recent events in Honduras. Shame on the Hondurans back home, the minimum one could in such circumstances expect is that the migrant workers had at least 30 percent of the seats in the Honduras Congress.

Assign to the diasporas a chair at the World Bank

Sir Michael Fullilove in “The world must adapt to diasporas” February 15, holds out that the “world would profit from developing an understanding…of diasporas issues” and I could not agree more.

As a former Executive Director at the World Bank (2002-2004) I believe that instead of wasting our time reshuffling the votes among geographically bound my-own-backyard interests, we need to assign one of the chairs at the board of the World Bank to the working emigrants community (and another one to the multinationals).

In 2007 the emigrant workers of El Salvador remitted to their homeland 3.7 billion dollars which, if this amount represents fifteen percent of their earnings means that their gross income was around 24.7 billion dollar. The official GDP of El Salvador, if we reduce it by the amount of the remittances, is then only 14.8 billion dollars. Now, you tell me ¿where is really El Salvador? Should not the Salvadorian diasporas have 50% of the seats on the Legislative Assembly of El Salvador?

Doing the same operation as above for the whole world we calculated that the Gross Diaspora Product is greater than that of the GDP of India, perhaps even China’s, and so why should not the diasporas sit at the executive board of a World Bank in globalized times?

Help the migrants to earn more and not to forget their mothers

Sir, the Inter-American Development Bank informed that the remittances sent home to the Latin American countries by their migrant workers in 2006 were $63bn and so, if we assume that this represents 15% of their gross earnings, we obtain that the gross migrant product (GMP) for Latin America should be around $420bn. The developing banks need to stop focusing so much on what in the corporate world would only be similar to the cash dividends paid out to the foreign investors. Since every dollar sent home by the son who works abroad has in fact the same economic (and spiritual) value than the dollar the mother receives from the son who stayed home, what they should be doing is helping both sons to earn more, instead of wasting so much time and resources on petty issues such as the transfer costs, and which are anyhow only reduced by real sustainable competition between those interested in that market. If there is one aspect though that is of utmost importance and that relates directly to the remittances, but that is basically ignored in all the projections of future remittances, that is the heart-drain that could cause someone working abroad to forget his home… and find a stepmother.

Remittances and their cost of transfer is only the tip of the tip of the tip of the iceberg.

Sir, in your weekend editorial about computers being no silicon panacea for developing countries, you make a comment with respect of the remittances to the developing countries saying they “are weakened by the crippling cost of transfers that cost as much as $30 per transaction.” This is truly looking at the tip of the tip of the tip of the iceberg.

For many immigrants having to pay thousands of dollars to get smuggled to an opportunity in life just because no functional temporary immigration programs have been enacted; being easily cheated in their new surroundings because no one cared about teaching them a foreign language; paying fortunes in phone calls to communicate with their families; having to live in cramped quarters paying exorbitant rentals; incurring many costs just because they are not allowed a drivers license; and making all type of other sacrifices in order to send some help home, the fees they pay for that might indeed be high, but, frankly, they are among the least of their problems.

Trying to understand the economic effect of immigration by looking at the remittances is a bit like trying to understand the world’s economy by looking only at the cash dividends paid out by corporation.

Development banks have looked more than enough at the issue of remittances fees and it will be solved, in due time, with competition among service providers. It is now high time to move on.

Sent to FT, November 20, 2005

Migration is much more important and transfer fees much less so!

Sir, in today’s editorial, June 10, The Global Workforce when mentioning that it refers to 3 percent of world population you are really underestimating the importance of current migration since, in some countries, more than 40% of their able workforce has migrated. Also you fall into the trap of making a big fuss about financial institutions “creaming” off large commissions on the remittances sent home by migrant workers. Honestly, in the life of a poor migrant these commission are just the smallest of their problems and had many developing agencies not spent fortunes navel-gazing this particular issue, they would have been able to advance much more in solving real problems and in helping to develop know-how about workable temporary legal migration programs. The expensive transfer fees that do not only affect migrants will be taken cared of in time by the time-honored tools of competition and technology.

migration
remittances