Because of their importance to the U.S. economy and to poor immigrants, international money transfers should be made cheaper, according to a Federal Reserve Bank of Chicago official.
Money transferred from individuals in the United States to people in other countries is “a possible vehicle that can help bring the low-income portion of recent immigrants into the financial mainstream,” said Curt Hunter, director of economic research at the Chicago Fed.
The total cost of an international money transfer, or remittance, is 10 percent to 20 percent of the value of the transaction, he said.
His remarks appear in a special March issue of the “Chicago Fed Letter” and were made at a symposium on remittances in November.
Remittances from the United States are estimated to have been as high as $20 billion in 2000, not including unofficial transfers, Hunter said. Mexico received the biggest share of those remittances, worth about $6.3 billion.
About 60 percent of Latino immigrants sent money home in the previous year and 40 percent do so regularly, according to another symposium participant, Louis DeSipio from the University of Illinois.
Most households that make international money transfers are low-income and send an average of $2,500 to $3,000 a year. Immigrants who send them tend to be young and poorly educated, DeSipio said.
Middle market’s mood: Banks suffering under the weight of bad corporate loans will be disappointed to learn that middle-market manufacturers remain pessimistic about their fortunes in 2002.
Only 51 percent of chief financial officers at 300 randomly chosen manufacturing companies nationwide expect their revenues to grow in 2002. That’s down from 73 percent in 2001 and 82 percent in 2000, according to the survey commissioned by Fleet Capital Corp., a unit of Boston-based FleetBoston Financial Corp.
In 2002, 14 percent said they expect their companies’ revenues to decline (up from 3 percent who expected it for 2001), while 32 percent thought revenues would be flat (up from 22 percent in 2001). Three percent were unsure or did not answer the question.
Although 47 percent believe their labor costs per unit will climb in 2002, only 32 percent anticipate being able to raise their prices.
More manufacturers–18 percent–expect to participate in a merger or acquisition this year, up from 10 percent last year. And among the smallest middle-market companies (those with sales between $25 million and $74 million), 17 percent expect to be involved in a merger or acquisition this year, up from just 4 percent last year.
Large and medium-size U.S. banks have become enamored with the revenue and income possibilities at middle-market companies in recent years. Unlike corporate Goliaths that look more toward the capital markets for funding, midsize clients tend to need more services from banks.
They’re also more loyal to one or two banks because they think of the bank as a partner, instead of a commodity provider.
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Jamie Dimon, chief executive of Bank One Corp., has sung the praises of the Chicago-based bank’s middle-market business. He has referred to it as a “gem” because of the long-term relationships it has with customers and the resulting profitability.