Configurations and Narratives
Edited By Gabriele Pisarz-Ramirez and Hannes Warnecke-Berger
Where do the Americas begin, and where do they end? What is the relationship between the spatial constructions of «area» and «continent»? How were the Americas imagined by different actors in different historical periods, and how were these imaginations – as continent, nation, region – guided by changing agendas and priorities? This interdisciplinary volume addresses competing and conflicting configurations and narratives of spatialization in the context of globalization processes from the 19th century to the present.
Salvadoran Transnational Transgressions: Remittances, Rents, and the Struggle over Economic Space
Abstract: The massive and ever-increasing amount of remittances circulating between Central America and the United States gave rise to new patterns of economic activities, and thus to an entire new set of economies. In comparison to economic models of the 20th century, this transnational remittance economy does not necessarily rely on state interventions, bilateral trade agreements, or other forms of management of economies. It is not about developing a national economy, but fostering individual well-being. It is not about formulating larger development strategies, but enhancing further remittances in an intrafamily relation based on moral. First, this chapter argues that remittances are rents and create spaces of rent. These economic spaces are based on political power instead of free markets. Then, the chapter explores how different actors intervene in these spaces of rent and thus manage the course of the economy. Next, the chapter analyzes the institutional setting through which these transnational spaces of rents are hedged and argues that the management of the transnational remittance economy releases social pressure from elite activity. Moreover, the chapter explores how and on which particular scale these remittance-induced spaces of rents are politicized in order to capture a share of the flow of rents.
El Salvador is located in between North America with its hemispheric hegemon—the United States—and South America. The tiny Central American isthmus links both continental landmasses in geological and geographic terms. The map clearly points out that El Salvador is south of Mexico and therefore it is part of Central America. It is Spanish speaking, has its own national flag and anthem, elects its own president, forms part of the Central American regional initiatives, and of course has its own economy and is known for producing one of the best coffees in the world.
At the same time, however, cultural, political, and economic transnational ties are also highly important for El Salvador. Newspapers maintain a special subsection dedicated to departamento 15,1 the Salvadoran expatriate community. ←219 | 220→Salvadoran-born US citizens can apply for dual citizenship and participate in Salvadoran national elections. At least the current party in government, the Frente “Farabundo Martí” para la Liberación Nacional (FMLN), maintains a party constituency in Northern California. In economic terms, the Salvadoran community living in the United States produces three times the GDP of El Salvador (Hinojosa-Ojeda). Almost every family has a relative in the United States: more than a quarter of the Salvadoran-born population lives in the United States and many of them send money back home to their families.
Both the geopolitical location and the socioeconomic orientation of El Salvador produce a set of questions, which are particularly relevant to understand the process of spatialization in the Americas: Is El Salvador part of Latin America, or is the tiny society in the Central American isthmus an outpost of the United States? What is its ‘place’ within the Americas?
For many Salvadorans, migration and remittances are part of their livelihood strategies. As an economy, El Salvador specializes in labor exports and the acquisition of remittances rather than in the production and exportation of commodities. With this changing position in the international division of labor and its microdynamics affecting households coping with daily needs, the Salvadoran economic space is redefined. On a macro level, El Salvador grows into the US economy. Domestic economic processes are increasingly dependent on US economic developments. US labor market dynamics as well as tax and foreign trade regulations have direct effects on households in El Salvador. On a micro level, migrants send a part of their earnings and savings to their families in El Salvador. They expand a monetary circuit, which is not necessarily based on the trade of commodities. While these remittances are part of wages and potential savings of the migrants in the United States, they appear as rents in the hands of families at home.
In this chapter, I discuss the impact of remittances on the Salvadoran economic space. I argue that remittances unfold a contradiction: first, as a macro flow of rent, remittances tend to connect formerly national economic territories, just like traditional commodity or other financial flows tend to do. Remittances transgress national economic borders. In contrast to other economic flows, however, remittances entangle labor markets instead of goods markets. Remittances flows are hard to control. Remittances are private monetary transfers that often escape both state monitoring and state control. Second, as a micro flow of rents, remittances tend to increase the economic autonomy of receiving households. Receiving households are enabled to enhance consumption without necessarily participating in the local labor market. They are able to distance themselves from economic conditions. At the same time, these households struggle to maintain ←220 | 221→remittances and thus strengthen their relationship with the family members living and working abroad. While the micro economic effect of remittances is increasing autonomy, the micro political effect is increasing control to stabilize future remittances.
Finally, I argue that this contradiction has an important implication for the current articulation of economic space. I interpret the development of this particular remittance space as a constant struggle of receiving households to maintain the control over remittances in order to secure their livelihoods. This struggle is getting complex as it involves an increasing number of actors apart from the receivers, such as banks, the government, hometown associations (HTAs), development nongovernmental organizations (NGOs), and international organizations. The chapter shows that this economic space is essentially contested.
The chapter is divided in four parts. First, it discusses the theoretical linkages between economic space and rents as a particular form of economic surplus. Second, it integrates remittances into these thoughts. Third, it shows the volume and the dynamics of remittances in El Salvador on macro as well as on micro levels and their respective influence in shaping economic space. Finally, the chapter turns to the spatial strategies of actors involved in this economic space and how these actors organize access to rents. The conclusion then elaborates on the contradictory role of remittances in both dissolving and restrengthening economic borders.
2Rent and Economic Space
Mainstream economics usually treat space as state-based, essentially capitalist, and as internally as well as externally homogenous. Definitions of economic space, although they remain rather implicit, include a strong but unquestioned relation of space, territory, and state. Economics are about supply, demand, and the market, or about production, consumption, and transaction within a given space usually treated as a state-space. The same is true for rents. While focusing on traditional sources of rent, such as oil and other raw materials or agrarian commodities, rent theory usually highlights the state as the most appropriate institutional setting in acquiring rents (Beblawi and Luciani). State economic space and rents thus become unified in a single concept—the rentier state-space—and both conventional neoclassic economics and political economy approaches to rents tend to highlight the state-space as the primary analytical unit.
In contrast to these theoretically rather pretentious conceptions of the triadic state–territory–economy space, I argue that economic spaces are survival spaces. In the first place, economic space provides the physical necessities for ←221 | 222→human survival, and through this metabolism, human practice appropriates and produces economic space. In this regard, economic space is material. The organization of economic space depends on the availability of economic surplus. Depending on how economic surplus is socially organized, economic spaces are shaped. Hence, I understand economic space as a synchronized spatial relation between the horizontal and vertical division of labor. In a horizontal dimension, economic spaces are topographies of networks of different economic places or locations. These networks evolve because places of production relate to places of consumption. These networked topographies are time-dependent circuits of labor, goods, and money. In a vertical dimension, the division of labor needs to be ordered, spaced, and stabilized, and economic surplus needs to be redistributed, which in the end involves the use of political power. In a strict sense, thus, economic space is always politico-economic (see, for this concept of economic space, Warnecke-Berger, Transnational Economic Spaces).
Economic surplus, the basis of the emergence of economic space, can take the form of rent or profit. In contrast to capitalist profit, economic rents evolve because of market restrictions, monopolies, or political power.2 Rent is a surplus earned by “a particular part of a factor of production over and above the minimum earnings necessary to induce it to do its work” (Robinson 102; Elsenhans, “Rente” 439). In contrast to rent, capitalist profit is unique. It depends on additional factors, such as competition among market-dependent entrepreneurs, the predominance of wage labor, and particular wages being paid in economic sectors that do not produce final consumption goods but machinery (Kalecki ←222 | 223→78–79). In this conception, capitalism and capitalist growth depends on rising mass incomes (Elsenhans, “Rising”) and on repelling the dominance of rents. In contrast to the more or less accidental development of capitalism, rents are rather ubiquitous. They appear when capitalist mechanisms are too weak or even absent and consequently, when politics dominate economies. When rents are present, political and economic spaces overlap, and social groups and collective actors need to rely on political means in order to access and appropriate economic surplus. When capitalist profit is dominant, in contrast, economic space emancipates from political space since elites become exclusively dependent on market transactions for their own social reproduction and do not need to intervene politically (Wood).
This perspective on both profit and rent as different forms of surplus has particular implications for the notion of economic space. In spaces of rent, the political struggle for access to rents is pivotal. Spaces of rent depend on the political means through which powerful actors realize rents. In turn, the availability of rents creates the ability to exert political control in the first place. Within spaces of rent, the vertical division of labor—hierarchy and stratification—is predominant. Rents tend to verticalize social relations and eventually lead to social closure (Warnecke-Berger, Politics). If rents are available, economic spaces are necessarily and directly infused by political power.
The current world economy is not only challenged by the increasing role of rents (Elsenhans, Saving), but it also experiences a changing composition of its surplus structure. While profits decrease in favor of rents, emerging forms of rent play a more and more important role. Remittances are among these emerging forms of rent (Warnecke-Berger, “La globalisation”). Traditional sources of rent, such as oil or agrarian commodities, are technically based on differential or absolute ground rents. These rents are realized within an institutional structure and usually tend to be appropriated on the national scale. This is one reason why the literature has been overstating the role of the state in approaching rents. In the case of migration and remittances, however, rents are appropriated on other scales than the state. Consequently, “rentier spaces” (Omeje 8) are theoretically disconnected from state-spaces on the national scale. Thus, focusing on remittances as rents in Central America brings about further insights into the economic dynamics of spatialization in the Americas.
3Remittances-Led Spaces of Rent
Perhaps more than ever, Latin America is today connected to the US labor market through the world’s largest migration corridor (Dickinson). However, it is not ←223 | 224→just migration, and hence the physical movement of people, that maintains these entanglements. Money flowing back again, sent by migrants to their families, is not only growing, but it is even increasingly becoming a substantial household income for transnational families in countries of origin. On a global scale, the volume of remittances surpasses official development aid and in some places even foreign direct investment. Remittances today are among the top sources of income for developing economies, especially for the economies in Latin America (World Bank).
Narrowly, remittances can be defined as migrants’ cross-border monetary transactions to their families who live in the migrant’s country of origin.3 In a broader sense, remittances are the transnational moral claim of families living apart from the migrant on a part of the migrant’s income. This moral claim affects the migrant’s propensity to remit. The moral claim generates remittances in the first place. As such, remittances do not appear because of pure altruism, an implicit contract, or competition (which the new economics of labor migration highlights, see, e.g., Stark and Bloom; Stark and Lucas). In contrast, remittances evolve because of individual and often moral, but still political interventions. From the perspective of the sender, remittances are savings. From the perspective of the receiver, however, remittances are rents. Therefore, the impact of remittances on economic space differs from other economic and transnational flows, such as foreign direct investments. It is peculiar in some regard: On the one hand, the appropriation of remittances is tied to particular places where the family and the migrants are still able to impose their ability to control this flow of money. On the other hand, the appropriation of remittances depends on a certain positionality and thus relies on different scales.
First, remittances evolve out of migrations. The root cause for transnational remittances is global nominal wage gaps. These gaps depend on differences in productivity as well as differences in exchange rates. While remittances occur because there are global imbalances, sufficient migrations would in contrast lead to diminishing these imbalances (Radu and Straubhaar). Individually, remittances originate from the income that a migrant worker earns. Without getting indebted, the migrant worker is able to send the actual amount of income minus the subsistence wage at the place where the migrant lives. Remittances thus are potential savings in the host economy which are transferred to other ←224 | 225→economies where the families live and where these families spend this money. Remittances expand monetary circuits beyond national borders, without necessarily being followed by compensatory commodity flows. In this regard, remittances are transnational debts; they are the moral claim of families in home countries on the migrant’s propensity to remit in host countries.
Remittances topographically link the place of production including value generation and the place of the wage bill “here” with the places of consumption and remittance spending “there.” Since physical distance separates the migrant and their home family, the situation of earning, saving, and sending money is spatially disconnected from the spending of money. The migrant is not able to fully decide on the spending of remittances, and the home family is not able to entirely determine the amount of money remitted by the migrant.
Both nodes form a translocal moral economy, in which the sending as well as the spending of remittances is negotiated (see, e.g., Paerregaard; and on the concept, e.g., Booth). This translocal moral economy connects particular places where migrants send money from with places to where the migrants send this money (Warnecke-Berger, Transnational Economic Spaces). The enforcement of the family’s claim on the migrant’s propensity to remit thus depends on weak sanctions and ultimately on communication beyond and across political borders. Technology such as international communications technology intervenes in these translocal moral economies (Hunter; Horst), as it alternates the bargaining position of both the household and the migrant.
However, these moral claims on the migrant’s propensity to remit not only depend on the family’s capabilities to enforce their claims within the translocal moral economy. They likewise depend on the social situation of the migrant. Since migrants often integrate themselves in social contexts in host countries—perhaps finding better jobs, founding new families, living alternative lives—the propensity to remit usually declines as settlement continues (Waldinger; Schunck). From the point of view of remittance receiver, this potential future loss of income due to declining remittances needs to be compensated by accelerating migration. Maintaining remittances flows then in turn requires increasing migration. In this regard, remittances further stabilize already established migration systems.
While stabilizing and maintaining circuits of human mobility and migration, remittances subdue the borders and boundaries of formerly ‘national’ economies. At this point, remittances become transnational in its very sense. In contrast to intrafamily financial transfers, such as the financial support for children, remittances are transnational in the sense that they cross already established economic territories and their borders. Nevertheless, remittances are not ←225 | 226→entirely detached from these boundaries since the appropriation of remittances “takes place” at particular locations and within specific spaces. Quite often, these locations are related to the family’s living and housing spaces that are the “micro-territory” (Bruneau 49) of family life. At these places, remittances are appropriated and redistributed in the first place. In addition to the family, other actors, organizations, and institutions than the sender and receivers of remittances themselves claim to control remittances.
Second, the appropriation of remittances is dependent on the appropriating actor’s position related to particular scales. Usually, the family at home captures and appropriates remittances. The economic production and the appropriation of remittances are thus geographically disconnected, but remain within the same scale of translocal families beyond national borders. In this case, the production and the appropriation of remittances are interlinked through translocal moral economies, the most basic node of translocal economic entanglement. However, there are additional forms of appropriating remittances. These forms reach from accessing the place of the home family toward approaching the entire space in which remittances appear. Fig. 7 illustrates the possibilities to appropriate remittances depending on the scale, the location, and the transfer channel.
The figure distinguishes the home country, where the migrant’s family lives, from the host country, where the migrant lives (the gray pyramids). Initially, remittances interlink the migrant with the migrant’s family. However, as soon as remittances are perceived as an important and beneficial form of income, they are likely to attract the attention of further actors who aim to control these monetary flows. These actors are situated on different scales ranging from the individual to the international, and theoretically dispose of the following spatial forms of approaching remittances indirectly:
•Influencing the propensity to remit: This form is not directed toward appropriating actual remittances, but appropriating potential future remittances and therefore a share of the migrant worker’s future income. It depends on either approaching the location where the migrant lives, or, approaching the migrant’s family location. A typical example is the NGO’s competition for migrant donations or the idea of approaching migrants’ philanthropy in the case of diaspora bonds (Ketkar and Ratha).
•Influencing transaction costs: Depending on the market structure among remittance operators including commercial banks, these actors are able to impose fees and therefore to gain access and to appropriate a part of the remittance flow. On average, remittance operators were able to impose 8 percent ←226 | 227→fees on the volume of world remittances in 2016. The income from such fees accounted for more than $48 billion (World Bank iv).
•Influencing the propensity to spend: A final form consists in approaching the destination of remittances and channeling remittances into ‘productive’ purposes. Changing the spending behavior of remittance-receiving households, involves financial literacy and financial inclusion programs (Anzoategui et al.) or micro credits (Mader), HTAs (Lacroix; Orozco, Migrant; Waldinger et al.) and political programs mainly focus on approaching the migrant’s family’s place. Furthermore, states can impose indirect taxes, such as value-added tax, which do not affect remittances directly, but the domestic demand structure that arises out of remittances.
Each of these forms is inscribed in different spatial settings depending on scale/positionality and place/location as shown in Fig. 7. While these different modes have in common that they need to rely on the support of the migrant and/or the migrant’s family and thus are bound to the place where the migrant and/or the migrant’s family lives, the articulation of scale is highly different.
As a space of rent, the remittance space is characterized by the constant and ongoing struggle about who, where, and how to appropriate remittances. Each actor’s strategy can be situated on particular scales that sometimes contradict each other in the case of conflicting strategies, or sometimes complement each other in the case of coordination. It is a veritable global remittance agenda in ←227 | 228→the making (Cross; Hudson). This agenda constructs an institutionalized spatial setting, a global economic remittance space, in order to control and to challenge the remittance flow.
Thus, as it was already argued regarding rents in general, the remittance rent space is highly interwoven with political power. Power intervenes in economic issues in order to appropriate and to control the flow of rents. However, power is situated on different scales and inscribed in different spatial settings. In the case of the migrant–family nexus, power relates to enforcing the moral claim on the propensity to remit and thus to shape the translocal moral economy. In the case of HTAs, power relates to the capability to convince migrants and their families of the developmental impact of their philanthropic projects. In the case of governments, power to appropriate remittances is inscribed in the institutional setting of the state.
The specifics of the remittance rent space, however, lie in the fact that remittances are hard to control within a fixed institutional setting. While in the case of classic sources of rent, such as mineral or agrarian commodities, the control of territories is pivotal, in the case of remittances, the control of economic behavior is crucial. Because of already existing migration channels as a precondition for remittances, the political means to control remittances are likely to remain weak and soft. This reflects the often described pro-poor nature of remittances as a new development mantra (Kapur).
Seen from this political economy perspective on remittance-led rent spaces, remittances are able to transgress formerly national economic spaces. Remittances are hard to control in a fixed institutional setting and therefore tend to escape from being appropriated directly by the state. However, in the following, the case of El Salvador shows that remittances indeed are controlled and that these modes of control are contested. Receiving families and households in El Salvador are able to emancipate from local economic conditions, but in doing so, they become increasingly dependent on US economic dynamics. Furthermore, a constant struggle has arisen in recent years over the control and the appropriation of these migration dollars.
4From Coffee to Remittances: El Salvador’s Economic Transgressions
The Salvadoran economic space has always been dominated by rents. However, remarkable shifts took place concerning the composition of rent. El Salvador changed from an agrarian commodity producer, and thus from the appropriation of differential rents, to an exporter of labor. At the end of the 19th century, ←228 | 229→El Salvador came to be known for its delicious coffee. Within several decades, it exclusively specialized in the production and the exportation of coffee, and the crop became the sole social, economic, and political engine of the country for much of the first half of the 20th century (Bulmer-Thomas; Dunkerley). Coffee came to be seen as the national wealth of the country, and a tiny oligarchy appropriated much of this wealth (Suter). Since the social situation increasingly sharpened due to oligarchic extravagance paralleled by the deprivation of the masses, and since socioeconomic exclusion, landlessness, and urban squatting became endemic, finally, a political conflict emerged. Beginning in early 1981, the FMLN openly challenged the oligarchy’s power and entered the civil war. As common to every Marxist guerrilla organization, the FMLN intended to redistribute the national fruits of the economy. This conflict led to a 12-year civil war that cost the lives of some 75,000 Salvadorans. The civil war devastated the country, and forced thousands to abandon their homes. Eventually, the war ended in 1992 when the warring parties signed peace agreements.
Due to the bloodshed and economic deprivation, outmigration began in larger quantities during these years of conflict and crisis. Particularly within the war-torn departments of Morazán and Chalatenango, families escaped the civil war and emigrated to the United States (Montes). With changing political realities and the approaching peace, the rationale shifted from flight to economics (Funkhouser). It was at this point that remittances began to accelerate. Today, around one-fifth of the national population lives in the United States. Almost every Salvadoran family has an absentee migrant in the United States, and more than 20 percent of Salvadoran households receive remittances on a regular basis (DIGESTYC).
4.1Stability of Remittances on the Macro Level
From the period when the civil war began in the early 1980s until recently, El Salvador entirely shifted its development model. While it had become initially integrated into the world economy as a commodity producer, it now serves as a labor reservoir for the US labor market. While coffee had been dominating the economy as the number one export item, coffee is almost insignificant today. The structure of foreign exchange earnings shows that contemporary El Salvador is more than ever dependent on remittances.
Fig. 8 shows the structure of export earnings in 1978 and 2015. El Salvador was still specialized in traditional agrarian exports in 1978, which then accounted for more than 73 percent of foreign exchange earnings. By 2015, however, traditional agrarian exports had slumped to little more than 5 percent. In the meantime, ←229 | 230→remittances appeared as the leading income category. In 1978, remittances accounted for only 9.9 percent. In 2015, remittances reached more than 66 percent, followed by tourism and maquila exports. El Salvador thus specializes in the export of labor and the recruitment of remittances (Gammage). Without remittances, the Salvadoran economy would simply implode.
Fig. 9 shows the volume and the share of remittances in relation to GDP entering El Salvador. Apart from the short break during the world financial crisis in 2008, remittances prove to be continuously growing. According to the World Bank (World Bank), El Salvador is today among those societies with highest remittance inflows, in terms of both share of GDP and per capita. Remittances excel multiple times official development aid, foreign direct investment, and are even higher than commodity and service exports. In 2016, remittances accounted for more than 4.5 billion US dollars, which formed 17 percent of GDP (BCR). Because of their huge impact on the domestic economy in terms of comparative trade advantages, El Salvador has become dependent on remittance inflows.
Remittances thus connect Salvadoran migrants in the United States with their families back in El Salvador. They link the reproduction of the labor force in El Salvador with the production sites in the United States, from where remittances originate. Salvadorans in the United States send an average of 37.7 percent of their earnings back home to El Salvador (Yang 133). This is a considerable share of the earnings, particularly when taking into consideration that about half of Salvadoran migrants in the United States are undocumented and are thus exposed to precarious job conditions and lower earnings than documented workers (Casillas). Nevertheless, remittances remain stable and even increase on the macro level, and with remittances, the Salvadoran economy grows into the US economy.←230 | 231→←231 | 232→
4.2Pro-Poor Distribution of Remittances
Following the latest statistical surveys, more than 20 percent of the total population received remittances in 2014 (DIGESTYC). The average remittance-receiving household obtained more than $195 per month, which represents around 50 percent of the average household income. The vast majority, over 90 percent of all recipient households, report that they use remittances to cover their daily expenditures (Keller and Rouse).
National Income (%)
Households Receiving Remittances (%)
Total Remittances (%)
Tab. 1 shows the distribution of remittances in El Salvador. The table demonstrates that even though income is highly unequal, and the richest quintile receives almost 50 percent of national income, remittances are pro-poor. The poorest quintile receives more than 40 percent of total remittances. Within this poorest income quintile, more than 34 percent of households receive remittances, while within the richest quintile, only a little more than 15 percent of households receive remittances. Likewise, the poor receive on average more remittances than the richer quintiles. Thus, the poor benefit from remittances disproportionally. At the same time, the poor need remittances predominantly to cover their livelihoods (Keller and Rouse) and are unable to afford saving or investment. But even in the case of higher income quintiles, remittances are mainly directed toward final consumption. Remittances thus make receiving households more independent of local economic conditions. These households are able to increase consumption, invest in education and health, and even reduce labor market participation (Acosta). However, this makes them even more dependent on future remittance inflows to cover daily expenditures. Particularly this dependence is relevant for the articulation of economic space, as this distinguishes remittances from the dependence on commodity exports, which are based on particular production sites. Remittances, in contrast, are the result of translocal intrafamily negotiations about the moral claim on the propensity to remit.←232 | 233→
4.3Volatility of Remittances on the Micro Level
The effect of this translocal moral economy is best seen in the fact that remittance flows to El Salvador are countercyclical. In times of economic hardship or natural disasters such as hurricanes or earthquakes, remittances to El Salvador tend to increase (Mohapatra et al.). Remittances thus mitigate local economic shocks and enable receiving families to insure against economic downturns. However, recent estimations elaborated by the Salvadoran central bank show that increasing competition in the remittance transaction market not only leads to lower transactions fees, which can be interpreted as favorable for migrants and receiving households. However, the same effect of lowering fees led migrants to increase the frequency of transactions. The share of migrants who remitted every month decreased from 59 percent in 2012 to less than 50 percent in 2014. During the same period, migrants who remitted their money every two weeks increased from 15 percent in 2012 to 27 percent in 2014 (Palacios and Hurtado de García, Perfil). While the macro flow of remittances is steadily increasing, on the micro level, remittances appear as highly volatile. Even though the macro flow of remittances ever increases, the volume of transactions increases even faster. The effect of this divergence is that the amount per transaction decreases, while the frequency of transactions increases.
This trend has tremendous effects on receiving households: Those households who depend on remittances in order to cover daily needs now need to readjust their economic activities to their main income category. This eventually translates into shorter planning horizons for their economic activities. Households who can avail themselves of a regular, stable, and continuous income structure are able to project their economic activity for longer time periods. Households with a fluctuating income structure, in contrast, need to readjust their livelihood strategies to ever shorter periods. Thus, not only the volume and the individual amount of remittances received are crucial to understand, but the frequency and the dynamics of transactions also affect the economic behavior of receiving households. In El Salvador, the increasing frequency of remittances leads to the unpredictability of future remittances, particularly for those who are in need of receiving remittances.
5Political Interventions across Borders: Appropriating Remittances
Apart from the dynamics of remittance flows on both macro and micro levels, the question of who controls and who allocates remittances thus is crucial to understand the formation of economic space in El Salvador. Illuminating the ←233 | 234→political strategies of rent channeling further highlights that this remittance-led space of rent is highly interwoven with political power. This becomes particularly evident in strategies of politicizing remittances within the United States. In 2004, for instance, when Salvadoran presidential elections approached, US congressional representative Tom Tancredo (R-CO) stated that
[u]nder an FMLN Presidency, the United States government would not have a reliable counterpart to satisfy legitimate national security concerns. Therefore, if the FMLN takes control of the government in El Salvador, it may be necessary for the United States authorities to examine closely and possibly apply special controls to the flow of 2 billion dollars in remittances from the United States to El Salvador. (Congressional Record 2004, E389, qtd. in Coutin 94)
In a general sense, however, attempts to control economic space in El Salvador have individualized over the last decades. Commodity exports, particularly in the case of coffee, involve fixed capital, land, labor, and commercial as well as merchant facilities in order to extract surplus and realize rents in monetary terms. In the case of remittances, as it was already discussed above, the extraction of surplus remains within transnational families and bounds to communication and weak sanctions, hence to a translocal moral economy.
In this regard, it is no surprise that the vast majority of remittances accrue in the hands of the receiving families. Virtually, this is the very nature of remittances. By remitting money back home, migrants show love. Regular money flows as well as gifts or treats for children are similar attentions (Kent 94). However, both remitting and spending of remittances are contested and both processes take place at different places. The migrant is able to decide on the propensity to remit, but not on the propensity to spend. The contrary is the case for the receiving household. Larger differences emerged between the migrant and the family concerning the allocation and spending of remittances. While migrants tend to prefer savings and investment, families in El Salvador spend remittances for consumption (Inchauste and Stein 56). While migrants often state that they feel like “golden cows being milked” by their Salvadoran families at home, as a Salvadoran migrant stated in an interview in San Francisco, the home families often accuse their migrants of being “parsimonious” or “selfish” (Focus Group Discussion). The arrangement of this translocal moral economy thus affects the “horizontal” redistribution of remittances between the migrant and the family in El Salvador. However, the translocal moral economy essentially remains on the same scale. Even though they influence this “horizontal” redistribution of remittances, migrants as well as households in El Salvador struggle against “vertical” incentives of actors situated on other scales.←234 | 235→
Many migrants have collectively organized in order to finance small development projects in their hometowns. These migrant philanthropic organizations and HTAs have developed in line with a highly vibrant Salvadoran diaspora network in the United States since the 1980s (Menjívar). In general, HTAs exist isolated from each other and distant to the Salvadoran government and its dependencies in the United States (Baker-Cristales). They are mainly focused on isolated development projects to support their communities. Many of these HTAs are able to raise considerable amounts of money in times of crisis or natural disasters in El Salvador, but find it problematic to maintain an organizational structure on an everyday basis, as a former HTA leader explained in an interview (Leiva). In this regard, HTAs resemble common small-scale development NGOs (Elsenhans and Warnecke-Berger). Although situated on a higher scale, HTAs reinforce the rent character of remittances, as they direct their funds not only to economic development and efficiency, but also to increase the personal prestige, as a successful San Francisco-based HTA leader explained in an interview:
Cuando tu trabajas en una organización algunas veces haces el trabajo porque te pagan, y aquí en esto tú haces y dedicas tu tiempo realmente, trabajas quizás más que cualquiera que trabaja en una organización de esas porque estas tan metido, ahora hay una recompensa, no todos lo vemos así, a mí no me interesa mucho pero es válido: es que al fin y al cabo en las comunidades tuyas tenés un reconocimiento de la comunidad. Antes vos llegabas y “¡Aahh! ¡Salud! Ahí va Martin”, hoy llegas “¡Oh! Hola que tal, como está, mire venga siente…”. Te dio un prestigio, imagínate en un cantón, esta persona que empezó a hacer algo, buscar cómo llevar agua al cantón, cuando llega: “ahí viene don Fulano”, ya es conocido, ya “venga un cafecito”. Y eso es estatus pues, y a lo mejor eso es lo que inconscientemente buscamos, de sentir que estamos haciendo algo loable. (Martínez)
In 2000, migrants sent up to 30 percent of remittances through informal channels. By 2014, almost 95 percent of remittances flowed through the formal banking system (Palacios and Hurtado de García, Remitentes). Within the same period, fees were reduced dramatically to less than 4 percent. Thus, the share of money that the banking system was able to capture was increasingly reduced. Official banks as well as international organizations such as the Inter-American Development Bank (IADB) or the World Bank recognized that the direct canalization of remittances almost immediately affects the translocal moral economy, and migrants tend to use more informal channels to withdraw their money from being controlled by other actors than the family. In an interview, Maria Luisa Hyman, an IADB official concerned with the development and implementation of development projects acknowledged that many former projects intended to reallocate remittances directly into development, but eventually failed because migrants and households ceased to cooperate. Instead, the IADB←235 | 236→
llegó a la conclusión que, y además como uno de nuestros objetivos principales es el tema de inclusión financiera, se llegó a la conclusión que una oportunidad era poder ofrecerles a las personas que reciben remesas educación financiera, trabajar con instituciones financieras para que les pudieran ofrecer productos de ahorro que después les sirvan para pagar gastos o inversión, como lo quieras ver, en educación, en salud. (Hyman)
The financial system thus reacted with two innovations. Instead of tackling remittances directly, banks as well as development projects accessed the micro spaces where remittances appeared. Both diaspora bonds and financial inclusion programs were developed to address the specific needs of either migrants or receiving households. First, diaspora bonds are bonds issued by home governments or commercial banks in order to attract migrant savings and to receive higher credit ratings for receiving cheaper loans on global financial markets (Ketkar and Ratha). In El Salvador, Banco Cuscatlán has been particularly active in offering diaspora bonds until the owner of the bank, former president Alfredo Cristiani, sold the enterprise to CityBank (Orozco, “De los lazos”). Second, financial inclusion has become a major tool not only to get access to remittances, but to include poor segments of the population into the financial system. Today, banks earn less money with remittance transactions than with offering credit lines to remittance receivers, as the CEO of Banco ProCrédit acknowledged in an interview (Proescher), and remittance receivers are able or in the need to balance remittance fluctuations with buying credits and eventually getting indebted (Inchauste and Stein 162). Thus, both strategies are not related to getting direct access to remittances, but to use remittances as an entry ticket to offer further services.
Finally, the Salvadoran government increasingly institutionalized a migration policy to foster migrant–home family relations, as Vice Minister for Salvadorans Living Abroad (Viceministra para los Salvadoreños en el Exterior) Liduvina Magarín (Magarín) expressed in an interview. This includes the right to not only vote for Salvadoran expatriates, but likewise engage in cultural life in foreign countries. However, this policy still remains modest, and even high-ranking government officials, such as the former Salvadoran vice minister of commerce and industry, José Francisco Lazo Marín (Lazo Marín), stated in an interview that an integral political strategy in channeling remittances is and has always been absent. The Salvadoran government still struggles to establish formal links to its diaspora and mainly provides migration assistance. However, since remittances have become dominant in El Salvador, the tax structure of the Salvadoran state has changed. Value-added taxes have risen to over 50 percent of tax income (Schneider). Instead of taxing labor and capital, thus, the state opted for taxing consumption, which is mainly financed though remittances.←236 | 237→
Thus, depending on the scale and the positionality of each actor who intervenes in this transnational economic remittance space, different strategies evolve. While families struggle to resist political interventions from superior scales, they need to calibrate the horizontal distribution of remittances. HTAs, banks as well as governments are then secondary actors within the remittance space. These actors recognized that remittances are hard to access directly. Insofar, these actors have developed means to indirectly capture remittances.
In doing so, they need to localize political access and influence the micro spaces where remittances appear in order to capture a share of the rent. As soon as this access becomes too strong, however, migrants and receiving households tend to resist these interventions. Thus, while on a macro level, remittances tend to entangle the Salvadoran and the US economy and thus create a transnational remittance economy, they tend to atomize the relations between actors on the micro level. Both the transnationalization and the (forced) atomized localization of economic space then goes hand in hand.
6The Struggle over Transnational Economic Space: A Conclusion
Remittances are a clear signifier of “transnationalism from below” (Smith and Guarnizo) and a mode of “transnational living” (Guarnizo). In economic terms, remittances are an alternative form of financial flows such as foreign direct investments and official development aid. Remittances occur as savings in the countries from which they are sent since they arise out of “normal” labor income. In societies to which remittances are sent, in contrast, they appear as rents. This remittance-led space of rent is highly interwoven with political power, and political interventions in order to safeguard, maintain, and even increase future remittances flows are commonplace.
This nature of being both “normal” labor income and rent makes remittances peculiar. They connect established capitalist spaces in the Global North with rentier spaces of today’s Global South. They need to be continuously mobilized within a translocal moral economy arrangement that entangles the migrant and the receiving family. In ‘practicing’ remittances, the family expresses a moral claim on the migrant’s propensity to remit, and the migrant expresses a moral claim on the family’s propensity to spend this money. Both claims can converge and thus foster translocal moral economies on a horizontal scalar level. However, they can at the same time diverge and thus generate social conflicts.
Both, migrants and home families need to defend their influences against actors at superior scales in order to control and appropriate remittances. This ←237 | 238→makes the entire transnational remittance space conflict-ridden and interwoven with political power.
Seen from this perspective, remittances rather produce transnational spaces of rent and thus reproduce global inequalities that already existed prior to the “lock-in” into this development model. While Salvadoran remittances are generated in the United States, they are spent in El Salvador. However, being able to finance Salvadoran consumption, Salvador has to forego the cost of reproduction of labor power. When the transfers of migrants in the United States back to El Salvador are less than the cost of reproduction of labor in only take off remittances merely describe a new form of debt. It is foremost individual debt, but which is used to finance the reproduction of entire societies. Thus, borders and boundaries change due to these economic processes, but it remains doubtful whether these changes are really in favor of the poor.
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1Politically, El Salvador has 14 departments. The departamento 15 is dedicated to the Salvadoran diaspora in the United States.
2The concept of rent follows a curious cycle. While it dates back to the Classics—Ricardo, Mill, Smith, and Malthus—and to Marx, it again gained scholarly attention in development studies in the 1960s and 1970s (Khan and Jomo; Schmid). With the demise of development theory and the rise of neoclassical economics, rent theory was mainly understood as rent-seeking (Krueger) and informed theories of the resource curse (see, e.g., Auty). Lately, however, there is a renewed interest in the concept, particularly from geographers (Andreucci et al.; Birch; Elden and Morton; Felli; Haila). However, this renewed interest is predominantly focused on land rent and revolves around the Marxist notion of ground rent. Marx distinguished ground rent, which is a major theoretical pillar of Ricardo’s work, from differential rent I and differential rent II. The new interest in land rent is based on the notion of pseudocommodities, as Marxists increasingly recognize that there are high prices for certain goods which do not embody labour power, and thus do not create value following Marx’ theory of value. Measured in prices, in contrast, land rent is a specific subcase of differential rent, which is not recognized by this new discussion. Refocusing the theory of rent exclusively on land markets eventually reduces its explanatory power.
3There is an ongoing discussion if remittances invariably need to be monetary transfers. Authors such as Levitt argue for a broader understanding and include other than monetary transfers, such as transfers in kind, as well as immaterial transfers, such as culture and ideas.←242 | 243→