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Cablegate: Remittances Reach Record High in 2007

VZCZCXYZ0010
RR RUEHWEB

DE RUEHBO #0609 0501705
ZNR UUUUU ZZH
R 191705Z FEB 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 1419
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHCV/AMEMBASSY CARACAS 9974
RUEHLP/AMEMBASSY LA PAZ FEB LIMA 5921
RUEHZP/AMEMBASSY PANAMA 1248
RUEHQT/AMEMBASSY QUITO 6562

UNCLAS BOGOTA 000609

SIPDIS

SIPDIS

WHA/EPSC FOR PMAIER; EEB/IFD/OMA FOR ASIROTIC; TREASURY FOR
MEWENS

E.O. 12958: N/A
TAGS: EFIN ECON EINV CO
SUBJECT: REMITTANCES REACH RECORD HIGH IN 2007

1. SUMMARY: Colombia's Central Bank expects 2007 to rank as a
record year for remittance inflows with the total estimated
to reach USD 4.4 billion. The amount represents Colombia's
second highest source of legitimate foreign currency inflows
after foreign direct investment (USD 7.5 billion), exceeding
oil exports (USD 3.9 billion). The United States and Spain
remain the two largest sources of remittances to Colombia,
though Euro-denominated remittances appear on the rise. A
slowing economy in the U.S. could bridle the flow of
remittances to Colombia in 2008, but strong FDI, continued
economic expansion of the Colombian economy, and high oil
prices should offset any negative impact. END SUMMARY.

2. Colombia's 2005 census estimated that 3.3 million
Colombians live abroad. Since 2005, Colombia's immigration
service (DAS) estimates that almost 350,000 additional
Colombians have left the country, though the annual total of
emigrants appears to have decreased since the late 1990s.
This significant expatriate population has remitted a
steadily increasing flow of foreign currency to Colombia
since 1999. Although final calculations remain pending, 2007
remittances appear on track to increase 13 percent over 2006
and have nearly tripled since 2000. The average value of
each remittance also increased from USD 264 to USD 341.

3. In 2007, total estimated remittances amounted to 2.6 times
Colombia's coffee exports and 1.2 times coal exports. The
United States and Spain continue to rank as the main sources
of remittances, each supplying approximately 40 percent of
the total. Venezuela, the United Kingdom, Italy and Ecuador
together account for an additional 13 percent of remittances
to Colombia.

4. While our Central Bank contacts do not have precise data
on the breakdown of remittances in Euros and the U.S.
dollars, they acknowledge that Euro-denominated remittances
have risen and the Euro's appreciation versus the dollar
constitutes at least part of the increase in the value of
remittances to Colombia. However, their calculations
indicate that the overall pace of inflows, facilitated by the
steady decrease in wire fees charged by international money
services and Colombian banks, and the higher amount per
transaction account for the majority of the increase in 2007.

5. Some local observers believe the rate of growth in
remittances will slow in 2008 as the U.S. economy cools, the
dollar remains weak, and the emigration of Colombians
continues to slow as economic and security prospects improve
in Colombia. Nevertheless, the overall impact of a moderate
decrease in remittances to the Colombian economy should
remain minimal given expectations for approximately five
percent GDP growth in 2008, rising FDI inflows, and high oil
prices.
Nichols

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