Nicaraguan expats ease poverty back home

July 7, 2011

If Nicaraguans living in Costa Rica stopped sending money back home to their families, the poverty rates in Nicaragua would skyrocket by 17 percent, according to a study conducted between 2009 and 2010 by the Academy of Central America (ACA), a nonprofit organization that seeks to promote scientific analysis in the social sciences.

According to the study, 60 percent of Nicaraguans live in poverty, and without remittances from Costa Rica, that number would jump to to 77 percent.

The study also reveals that 237,000 Nicaraguans live in Costa Rica. Of those, 45 percent (107,000) send an average monthly remittance of $134 to relatives or friends, enough to fully support a person’s living expenses or provide children with an education.

In 2006, Nicaraguan immigrants sent home an average of $43 per month, 32 percent lower than in 2010. Teledólar and Western Union are the two preferred companies used to wire money.

The study results were presented  July 1 and included the collaboration of the Multilateral Investment Fund, (an agency attached to the Inter-American Development Bank), the International Organization for Migration and the Spanish Cooperation Program.

The report shows that 50 percent of remittances to Nicaragua comes from Costa Rica. The next most important country for remittances to Nicaragua is the United States.

The study also highlights that money sent from Costa Rica reaches the poorest segment of Nicaraguans, according to Ricardo Monge, staff researcher at ACA.

“The Nicaraguans who receive financial aid from the United States generally belong to the middle class,” Monge said. “The reason is that many of these families sent their children away during the Sandinista revolution because they had more resources.”

“However, those migrating to Costa Rica are the poorest Nicaraguans and they barely have the money to cross borders, and they do it in an illegal and dangerous ways most of the time,” said Monge.

Most Nicaraguan remittance recipients use the money to meet basic needs such as food, cleaning products, groceries and personal care items (86 percent). Others use it to pay utilities (63.8 percent), to cover health expenses (46.7 per percent), to buy clothing and footwear (45.2 percent) and to pay for education (44.8 percent).

Few households are able to save the remittances (10.4 percent), or invest the resources by building or repairing a house (11.6 percent), or even invest in a small business (7.5 per percent).

According to statistics from the Central Bank of Costa Rica, last year Nicaraguans living in Costa Rica sent home more than $171.6 million, 5 percent more than 2009, when the total amount was $163.4 million.

Most senders (93.6 percent) transfer money to their families on a regular basis. Those who wire money occasionally do so primarily when the family requires it (60 percent), when an emergency occurs (10 percent) or when they can afford to (30 percent).

One-third of Nicaraguans said they had to decrease the frequency of the money transfers to Nicaragua because of the economic crisis of 2009. Of those, 70 percent reduced the amount sent while the remaining 30 percent did not send any money at all.

To gather the data, researchers targeted specific communities with high Nicaraguan immigration rates, such as La Carpio, an impoverished neighborhood in western San José, and Barreal, a district of Heredia north of San José. Most Nicaraguans who wire money on a regular basis come from Granada, Masaya and Managua departments.

Empowering Immigrant Workers

Considering the strong impact of immigrants on the Nicaraguan economy, the same organizations that took part in the study also allied with Costa Rica’s Banco Nacional with a common objective: to provide Nicaraguan expatriates with the tools to improve their living conditions here through the creation of micro- and small businesses.

“We must support all these immigrants who happen to have an enormous entrepreneurial spirit,” said Monge. “During our research we found that many immigrants were entrepreneurs back in Nicaragua, but in Costa Rica they became employees. Many of them wish to own their own businesses again.”

However, the main challenge many people face is a lack of access to credit options through the national banking system, usually because they are poor and don’t have assets to serve as collateral for back a loan.

A partnership between the Costa Rica Institute of Technology (TEC), Banco Nacional and the Mixed Institute for Social Aid (IMAS) led to the creation of “Business Incubator,” a place where immigrant entrepreneurs can receive assistance from professional business consultants. To date, the incubator has helped 28 immigrant families develop small business.

Aspiring entrepreneurs who join the incubator take several courses at TEC, where they learn the basics about business management. If professors deem a project viable, then IMAS will help secure Banco Nacional business loans.

“We have changed our entrepreneurship courses and adapted them to suit the needs of immigrants who usually have only a basic education,” said Eugenia Ferreto, director of the TEC’s Business Incubator Center. “They understand the concepts quickly and attain a clearer view on how to be successful with their initiatives.”

“We believe that supporting entrepreneurship within the immigrant population benefits everyone,” said Miguel Campos, program coordinator for the Development Banking Initiative, a national banking program that grants loans to small and medium enterprises.

“People can be more financially secure and be in a position to send more money to Nicaragua. With the right support, they could become an employment source for Costa Ricans. Nicaraguan immigrants have great potential and great initiative,” said Campos.

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