measuring the impact of the financial crisis on workers’ remittances, using high- frequency itrs...
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Banco Central Banco Central do Brasildo Brasil
Measuring the Impact of the Measuring the Impact of the Financial Crisis on Workers’ Financial Crisis on Workers’
Remittances, Using High-Remittances, Using High-Frequency ITRS DataFrequency ITRS Data
Washington, DC, June11-12, 2009
Fernando Lemos and André VillelaFernando Lemos and André VillelaBanco Central doBanco Central do BrasilBrasil
Banco Central Banco Central do Brasildo Brasil
The Brazilian International The Brazilian International Transactions Reporting System Transactions Reporting System
(ITRS)(ITRS)
Banco Central Banco Central do Brasildo Brasil
Description of the ITRS
The ITRS is the main balance of payments data source in Brazil. It is
reminiscent, as in many countries, from an exchange control system. Although
controls were lifted, the exchange registration structure was kept for statistical
and market surveillance purposes.
The ITRS coverage is very broad for transactions that involve transfers of
payments in cash or deposits in which one party is located in the country, which
is the case for workers’ remittances. This is due to the foreign exchange
market as well as to the banking system structures in Brazil.
Banco Central Banco Central do Brasildo Brasil ITRS Coverage
Foreign exchange market and banking system structures in Brazil:Transactions in foreign currency are illegal;
Observance of law regarding foreign exchange transactions are
enforced;
Furthermore,The banking system is widespread, easily accessible and
technologically advanced;
Purchases and sales of foreign currency face no restrictions, either for
residents or non-residents.
These market structures present strong restrictions and no economic incentives
for the use of foreign currency for payments of transactions in the country.
Therefore, foreign currencies, in practice, are not used as a means of payment.
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ITRS Framework
The ITRS is the main balance of payments data source
Mandatory immediate registration of each foreign exchange
transaction (high frequency data)
No reporting threshold (all transactions must be reported)
Exchange contracts are generated “inside” the Banco Central do
Brasil Information System (SISBACEN) by means of inputs by
banks and other foreign exchange dealers
Database owned and managed by Banco Central do Brasil
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ITRS Framework
Information obtained from ITRS
Transaction:o Economic natureo Amounto Currency
Residents:o Nameo Tax payer codeo Economic activity
NonresidentsoNameoCountry of residence
Shortcomings: channeling by MTO through headquarters/financial centers hinder the quality of geographic breakdown.
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ITRS Framework
The characteristics of the ITRS described previously allow for the collection of highly detailed information regarding the flows and structure of the workers’ remittances market.
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Recent Findings Using Flow and Recent Findings Using Flow and Market Structure DataMarket Structure Data
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Recent Findings in Workers’ Remittances Inflows
The analysis of data for the first five months of 2009 show that inflows of
workers’ remittances remained on a strong downward path that began in 2008.
This same trend is observed in two very distinct labor markets for Brazilian
immigrants: Japan and the United States. In Japan, practically all Brazilians (of
Japanese descent, who immigrate under specific regulation) work in the formal
labor market. In the United States, the vast majority of Brazilians are self-
employed and many work without a legal permit and/or are illegal immigrants.
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Workers’ Remittances Inflows
The inflows of remittances in terms of geographic allocation by the United States, Japan and Other countries have not changed significantly over the last years.
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Workers’ Remittances Inflows
Statistics for the last eight years seem to show that inflows of remittances have not deviated significantly from its upward trend.
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Workers’ Remittances Inflows – Recent Periods
But a closer look at more recent periods shows inflows below the US$ 200 million mark for the first time since early 2006.
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Workers’ Remittances Inflows – Recent Periods
It must be acknowledged that a strong and sudden depreciation of the Real in US$ terms had a significant impact on remittances. A surge was followed by a steep descent.
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Workers’ Remittances Inflows – Surge and Descent
The surge and descent are likely connected, the surge being an anticipation of remittances saved (which could in fact be transfers other than workers’ remittances) and the descent being a result of the complete depletion of savings that serve as reserves in previous periods. Note that there is no evidence that the descent is a consequence of an appreciation of the Real.
US$ million
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Workers’ Remittances Inflows – Accumulated Inflows
This could lead to the conclusion that the inflows of workers’ remittances will soon return to the US$ 200 million to US$ 250 million range, but the annual accumulated inflows, having reached in May 2009 the lowest level since May 2006, seem to support the perception of a downward trend.
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Workers’ Remittances from Japan
Bilateral data reinforce the idea that a recovery in the short run is unlikely. Workers’ remittances from Japan, which fell at a steeper rate than those from other regions, are the best example.
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Workers’ Remittances from Japan
The decline in value of remittances from Japan was due mainly to the sharp fall in the number of recipients that began in the last quarter of 2008. This is very likely linked to reduction in the number of remittances senders, a result of the significant number of layoffs of Brazilian workers in Japan.
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Workers’ Remittances from Japan
Furthermore, the average amount received per remittance from Japan in the beginning of 2009 entered a downward path towards the lowest level in recent years.
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Workers’ Remittances from The United States
Although less intensely, workers’ remittances from the US have also fallen sharply. Data for the last three months are at the lowest level since the beginning of 2006.
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Workers’ Remittances from The United States
Workers’ remittances from the US in annual terms are at the lowest level since the beginning of 2004. Although monthly data - as seen in the previous graph - show a possible settlement, the slope for the12-month accumulated flows is still pointing downwards.
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Workers’ Remittances from The United States
As in the case of Japan, the number of recipients of remittances also fell sharply in the first months of 2008, to the lowest level in the compiled series. The 12-month moving average shows a persistent downward trend.
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Workers’ Remittances from The United States
The average workers’ remittances received per person from the US have a curve similar to those from Japan. The slight difference – the descent in this case is less pronounced – may be due to the differences in structures of job markets for Brazilian immigrants, insofar as jobs and remuneration for Brazilian immigrants in Japan are comparatively more homogeneous.
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Workers’ Remittances from Other Countries
Workers’ remittances from countries other than the US and Japan have fallen as well, although not as sharply. Inflows are at a level slightly lower than the average since 2006. The 12-month moving average is practically unchanged and presents a very slightly negative slope.
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Thank you for you attention.Thank you for you attention.