Oversight Hearing on "Accounting and Investor Protection Issues
Raised by Enron and Other Public Companies."

Thank You, Mr. Chairman, for the opportunity to testify this morning on an issue that is of great importance not only to millions of Hispanic immigrants in the United States but also to the economies of most Latin American nations.

My name is Sergio Bendixen. I own a public opinion research company based in Miami, Florida that specializes in polling Latinos in the United States. I have twenty years of experience in the field. I was retained last year by the Multilateral Investment Fund of the Inter-American Development Bank to conduct a national survey of Latin American immigrants residing in the United States on the subject of cash remittances to their home countries.

1000 respondents were interviewed by telephone during November and December of 2001. They were all Latin American immigrant adults residing in the United States with family in their home countries. Even though a large majority of the poll respondents were from Mexico, immigrants from 17 other countries in South America, Central America and the Caribbean also participated in the study. The margin of error for the full sample of the study is approximately three percentage points. It should also be emphasized that a special effort was made to simplify and pre-test the polling instrument so that immigrants with little formal education clearly understood each question. More than 90 percent of the interviews were conducted in Spanish.

MAJOR FINDINGS

1. A large plurality of Latin American immigrants belong to the lowest socio-economic group in our society. Our poll indicates that 41 percent of our representative sample has a pre-tax annual family income of less than $20,000. Another 23 percent has an annual income between $20,000 and $30,000. Only 21 percent can be considered to belong to the middle class with an annual income above $30,000. The remaining 15% did not answer the poll’s income question. The educational level of Latin American immigrants is also low. 40 percent have not completed high school and only 10 percent are college graduates. These immigrants work mostly in minimum wage jobs and receive few benefits from their employers. They work in the least attractive and most menial jobs as hotel maids, parking attendants, restaurant busboys, agricultural workers, etc. Latin American immigrants are some of the hardest workers in our society; yet receive some of the lowest wages.
2. 69 percent of all Hispanic immigrants send money to their family in Latin America according to our study. Even though census numbers are somewhat inaccurate for this population, we calculate that there are 10 million Hispanic immigrants in the United States that are involved in the cash remittance process. It is important to note that the younger immigrants (18 to 34 years of age) and those from the lowest socio-economic group (annual income below $20,000) are much more likely to send cash remittances than older immigrants or those that have achieved middle class status. The study also reveals that the average Latin American immigrant sends cash remittances to his family seven times a year. Moreover, 44 percent told our interviewers that they send money to Latin America every month. And as we all know, this is not a new economic phenomenon. 54 percent of our sample reported that they had been sending money to their home countries for more than five years. Finally, our poll indicates that the average cash remittance is approximately $200. Our study’s estimate of the total annual amount of cash sent by Latin American immigrants to their families is 15 billion dollars.
3. The largest segment of the Latino immigrant community – 41 percent - utilizes the best-known international money transfer companies – Western Union and MoneyGram – to send cash remittances to their countries of origin. Another 29 percent use the smaller money transfer companies or couriers that specialize in deliveries to Latin America. Many also send their cash with friends or family members traveling back home. Only 20 percent utilize the more traditional financial institutions – banks and credit unions – to send money to Latin America. 10 percent of our sample did not answer this poll question. It is also important to note that most of the poll respondents accurately answered that the transfer fee paid in the United States to Western Union or MoneyGram to send $200 to Latin America is between $15 and $20. The study also reveals that immigrants that use banks or credit unions for their money transfers benefit from lower fees. This group reports spending less than $10 to send $200 to Latin America through their bank or credit union.
4. An overwhelming majority of Hispanic immigrants are unaware that their families in Latin America receive less money than what they send from the United States. About two-thirds of them are ignorant of the additional commissions and fees charged and of the lower exchange rates used in Latin America that result in their family’s receiving a lesser amount of money than what they send to them. 58 percent told our interviewers that their family receives the full amount sent from the United States. Another 9 percent said that they do not know whether their family receives the full amount or less. Only 33 percent of Latino immigrants seem to be aware of the extra charges that are discounted from their cash remittances to Latin America. Mexican immigrants are the only group that is somewhat well informed on this issue. 48 percent are aware that their family receives a lesser amount. But more than 90 percent of South Americans, Central Americans and Dominicans are ignorant about the "exit charges." When these immigrants were informed that besides a fee paid in the U. S., international money transfer companies often provide unfavorable exchange rates or discount additional commissions or charges in Latin America, a large majority of them felt that the fees paid for the service are excessive and unfair.
5. Only 56 percent of all Latin American immigrants in the United States have a bank account. Even though this rate compares favorably to rates in Latin American countries (about 20 percent have bank accounts), it is considerably smaller than the rate for the general population of the U. S. (over 80 percent). The percentage with bank accounts shrinks to 46 percent for immigrants that are not U. S. citizens, to 38 percent for those with annual incomes below $20,000 and to 32 percent for Latino immigrants between the ages of 18 to 24. It is important to remember that these are the immigrant demographic groups that are most heavily involved in the cash remittance process. Latino immigrants mention that the main reasons they do not have a bank account are: "do not have proper documents," "the process is too complicated," and "do not speak English."

1. Full disclosure. Latin American immigrants should be informed accurately about the full cost of transferring money and of the services provided by the international money transfer companies. This should be done in a way that is easy to understand for a population that does not have a high educational level. Full disclosure should unleash market forces that, hopefully, will result in a significant reduction in the cost of sending cash remittances to Latin America through international money transfer companies. It is unconscionable that the poorest of the working poor in our society – most of them making less than $300 per week - are paying approximately a 12.5 percent surcharge every time they send money to their family in Latin America.



2. The banking community of the United States should seriously consider funding a massive public relations campaign to inform the Latino immigrant community of the benefits of opening a bank account – including the significant savings in the cost of money transfers to their home countries. The banking industry should also study and consider reforming some of the "process" issues that make Latino immigrants reluctant to open a bank account in the United States.

Mr. Chairman, that concludes my testimony and I am happy to respond to any of the Committee’s questions.

Thank you very much.

Home | Menu | Links | Info | Chairman's Page