Remittances, Migration and Development in Cape Verde
Long known for its deep-rooted tradition of emigration, Cape Verde receives sizeable remittances from abroad every year. In fact, the diaspora outnumbers the resident population on the islands, and almost every family has relatives in foreign countries. Although emigration has been reduced in the last decades, potential emigrants continue to prefer destinations like Europe and the United States.
Analysing a problem that is more complex than initially thought, do these remittances contribute to the development of the country involved, or are they putting obstacles in the way? How is the money used in Cape Verde?
Transfer channels
There are several legal channels for money transfer, the most important being banks, money transfer operations (MTOs) and microfinance institutions (MFIs). Non-governmental organizations and post offices provide similar services, just as some credit cards offer innovative and expedient alternatives to those who want to make such a transfer.
Remittances can be sent in different ways, and examples of legal channels and services are global MTOs such as Western Union and MoneyGram, regional MTOs, national and international banks. It is commonly thought that in these situations the fees are very hefty. This is because the charges are proportionally higher for small funds. We know from reports of the World Bank that the rates depend a lot on the amount of remittance, the channel used, from where the remittance is sent and its destination, and in the end, the fees represent about 20% of the value transferred.
While all these legal transfer channels are available, informal systems are having a hard time due to factors like forced migration and fear of international terrorism, with which remittances are very often associated.
Regarding illegal transfer channels, Hawala and Hundi are two quite well-known informal channels for remittances. They are not uncommonly implicated in money laundering and terrorism, and they are designed to be less efficient. However, some believe that sending money via these systems can be cheaper, faster and even more secure than formal channels.
View of Mindelo
Cardoso (2012) explains succinctly how Hawala works, remarking that “the working mechanism can be summarised as follows: the emigrant goes to a system operator (hawaladar) – any laundry, pizzeria, money exchange, travel agency or just one of the closest corner grocery stores – the worker hands in the amount that he or she wants to remit, pays a small service commission and receives a security code to be passed to the recipient. By means of a simple communication, by fax, telephone, or more recently, by email, the corresponding hawaladar based in the destination receives the order, who is then responsible for delivering an equivalent amount to the emigrant’s family after verifying the secret code. The process going from one operator to the other is completed in less than one week in regular cases, but inversely, in the absence of proofs, receipts, records or visible money flows to establish connection between two sums, the circuit is closed even when no money has been circulated.”
Accordingly, it is not certain that the benefits outweigh the costs in using these informal systems, but to avoid the costs and guarantee that they are not used in association with money laundering and terrorism, viable options are needed. This means that, instead of repressing the informal operations, it is necessary to improve the banking system, for when there is such repression and no alternatives, migrants and their families are placed in difficult situations.
“For Cape Verde, remittances constitute an important financial support for many families and are one of the most important transnational links between the diasporas and the country of origin, with particular relevance for the household. They are used frequently to cover daily expenses, education and health. Productive investments are still limited. Reliance on informal channels is considerable, which may the case of half of all migrants.” (Tolentino and Peixoto, 2011).
Poverty reduction and inequality?
De Haas (2007), drawing on a study of 71 developing countries, remarks that the intensity and severity of poverty in developing countries are, in fact, reduced through remittances. Further analysis of existing data indicates that remittances can cause inequality to worsen initially because emigration is a selective process that is not affordable to all. In small needy countries like Cape Verde, more disadvantaged people often do not have the means to emigrate. Therefore, this section of the population can only benefit from remittances indirectly, through the effects of the spending of remittances in the national economy, through salaries and employment in communities that send migrants.
Many young people who work for little remuneration and reside in Cape Verde have difficulty applying for visas to leave the country, prompting some to acquire falsified proofs of employment and bank statements. Due to the frequency of such occurrences, the application is becoming more restricted and rigorous, making it increasingly difficult to obtain the needed visas.
While remittances contribute significantly to income stability and well-being in developing countries, it does not necessarily follow that remittances alleviate poverty. Yet, small and/or impoverished countries are the most dependent on remittances, with remittances accounting for more than 10% of GDP.
Regarding the use for migrants’ money in the countries of destination, it is mostly spent by families to cover daily expenses, education and health costs. In Cape Verde, a survey was conducted among families which receive remittances from emigrants in Portugal in 2007. It revealed how the recipients used the money: for day-to-day expenditure (85%), health (54%) and education (54%). Remittances also provides money for the construction / purchase / renovation of houses, savings / fixed-term deposits, business investments and family trips abroad. There is for a fact a positive impact on poverty reduction and economic growth, directly or indirectly.
Economic growth / Economic development
Remittances establishes a clear relationship between migration and development, hence different from other external financial flows as regards stability, predictability and direct benefits for the families.
Analysing the perspectives of various authors, while opinions concerning the impact of migration on social and economic development in migrant sending communities and regions tends to be positive, the same does not apply to opinions on the relationship between remittances and national development. Without a doubt, remittances play an increasingly vital role in the guarantee and improvement of living standards of millions of people in developing countries, namely in Cape Verde. However, we cannot expect these monetary transfers alone to fix the more structural development challenges, insecurity, bureaucracy, corruption and, above all, poor infrastructure.
Even so, if these countries choose the right development path and economic growth becomes a reality, migrants will possibly recognise the investment and employment opportunities, deciding eventually to return to their respective countries. A clear example of this is the case of Brazilian emigrants in Portugal returning to Brazil due to improving conditions.
In the case of Cape Verde, immigration to the country has increased in the last decades, with some recent studies suggesting that the immigrant population in Cape Verde went up by roughly 20% and estimates for the coming years predict continuation of the upward trend.
Social / Cultural impacts
Remittances also play an important role in the transformation of national social structures. We know that emigration can lead to less positive situations, like the prolonged separation between spouses, parents and children. Nonetheless, remittances from emigrants can contribute to improving the living standards of their families and educating youngsters.
Cultural and social changes brought about by migration and remittances will in turn affect future migration trends. In this context, it is common to speak of a “culture of migration”, very true for Cape Verde, where international migration is associated with material, social and individual successes, where migration has almost become the norm and not the exception and immobility can be perceived as a sign of weakness.
We may equally reflect on the role that migration and remittances have had on the status of women in society, for while some authors believe that male migration at times promotes the emancipation of women who stayed behind, other authors suggest that there is limited existing empirical evidence for structural impact. There may still be long-term benefits for women, though.
Several authors put forward the hypothesis that, apart from older marriage, increased female labour force participation and better education, migration to Europe has contributed to the spread and adoption of European marriage and nuclear family norms, hence accelerating demographic changes. Therefore, it is important to refer to the specific cultural context of the country of destination and the relative differences from the country of origin when assessing the social and cultural impacts of migration.
However, brain drain is a problem. Emigration in Cape Verde is not a bed of roses. In fact, it has created a serious problem of brain drain. One common situation involves young students who decide to study abroad (in Portugal, for example) and do not return to Cape Verde after completion of their university education. According to data between 1997/98 and 2002/2003, about 77% of students (around 5,382) left the country and did not return.
With regards to the emigration of qualified workers, Cabo Verde has the highest rate of the entire African continent, with studies showing that between 1990 and 2000 there was an increase of around 10.7%, from 56.8% to 67.5%.
Consequently, it is believed that migration is often an obstacle to development because poor countries are deprived of their valuable human resources. What sustained out-migration represents is that emigration may be at the root of development problems, especially in the case of the emigration of health professionals, a frequently cited example of how hugely damaging it is for the countries of origin.
On the other hand, professional brain drain may reap long-term benefits, in the form of remittances, investments, commercial relations, new knowledge, innovations, attitude and information in the middle and long term. This type of emigration and the remittances that follow may have a motivational effect on family members and others of the emigrant communities, possibly encouraging and enabling them to study.
It is important not to exaggerate the impact of policies to avoid brain drain, knowing that if the structural causes persist, it is likely that the problems will stay. Some authors even state that a coercive approach to tackle brain drain may only aggravate the discontent among potential professional emigrants. In these countries, including Cape Verde, high unemployment rate among skilled workers is common, and that is frequently the result of failed or badly implemented education policies. Yet, to address the real needs of a country, a better approach is only possible with education and training.
Certain authors argue that a more realistic response to emigration requires abandoning the “brain drain” approach and trying to prevent, or discourage, highly qualified people from staying in their countries of origin. On the contrary, the governments of these countries should encourage an inverse “brain gain” by means of emigrants’ compromise, remittances, investments and participation in public debate. Places like India and Taiwan seem to have reaped considerable success with policies designed to promote ties with emigrant communities and effectively transform “brain drain” into “brain gain”. Therefore, it may be concluded that what is best able to invert brain drain is really national development.
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