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Cablegate: Spain: Immigrant Remittances Achieve Record Levels

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS MADRID 003163

SIPDIS

TREASURY PASS TRACI PHILLIPS, FEDERAL RESERVE

E.O. 12958: N/A
TAGS: EFIN ECON SP
SUBJECT: SPAIN: IMMIGRANT REMITTANCES ACHIEVE RECORD LEVELS

1. Summary. The large increase in cash remittances by
immigrants from Spain to their home countries has caught the
attention of the general Spanish media and the business press
this summer. According to the Bank of Spain immigrants and
other foreigners residing in Spain have remitted
approximately EUR 250 million (USD 322 million) a month
during 2004, an increase of 20% over last year. The majority
of remittances leave Spain for Latin American countries. The
government of Morocco reported a 64% annual increase in
remittances in 2003 to EUR 300 million (USD 366 million) Some
observers suggest a tie to drug smuggling and money
laundering, but no solid ties have been made. End Summary.

2. The large increase in cash remittances by immigrants from
Spain to their home countries has caught the attention of the
general Spanish media and the business press this summer.
According to the Bank of Spain (BoS) immigrants and other
foreigners residing in Spain have remitted approximately EUR
250 million (USD 322 million) a month during 2004, an
increase of 20% over last year. BoS figures also indicate
that the majority of this money (57%) is sent to Latin
America. Another 3.5% is sent to European countries. The
numbers also show that 91% of all remittances from Spain go
through the U.S. The BoS does not have exacting figures for
money headed to other regions. The recent press highlighted
reports by the government of Morocco that Moroccans resident
in Spain sent EUR 300 million (USD 366 million) home in 2003,
an increase of 64% over the previous year.

3. Sending remittances of income earned in Spain to their
countries of origin is the most important banking activity
for the vast majority of immigrants in Spain. However, the
flow can be hard to track due to the use of the non-bank wire
services and the unofficial immigrant service centers known
as locutorios. Much of the money flows in small amounts. A
contact at Banco Santander (Spain's largest bank) emphasized
that due to the difficulty of tracking these data, the BoS's
statistics could not be entirely accurate. Our contact
de-emphasized the press focus on the large rise in
remittances, noting that new regulations in recent years and
the efforts of Spanish authorities to increase supervision to
prevent money laundering has led previously untraceable funds
to show up in statistics. In addition, the rise in immigrant
numbers and their improved economic position contributes to
greater flows home.

3. Spanish and international business journals have
highlighted the fight between Spanish banks and savings
exchanges to attract immigrant business. Most remittance
business is captured by money wire services such as Western
Union or MoneyGram and through locutorios. The press
reports that the savings exchanges (cajas de ahorro) have
been more successful at drawing immigrant businesses than
traditional banks. However, the larger Spanish banks are
interested in the immigrant market, particularly to attract
business in more profitable banking services. Both our Banco
Santander contact and a contact at Spain's second largest
bank, Banco Bilbao Viscaya Argentaria (BBVA), indicated that
their banks are developing plans to attract more immigrant
business, but not focusing on remittances. Our BBVA contact
noted that 700 thousand immigrants entered Spain in 2003 and
the immigrant flow from 2000-2004 comprises 4-5% of Spain's
current population. These new immigrants are staying and
offer a strong market for new customers.

5. An August 9 article in the Spanish paper El Pais, focused
on the large increase in remittances from Moroccan
immigrants, citing the 63.7% increase in 2003 over 2002
figures from the government of Morocco. The article did not
explain the large bump in remittances which paralleled a
worldwide increase in Moroccan remittances making Morocco the
fourth most important recipient of emigre remittances after
India, Mexico and the Philippines. The article mentioned the
possibility that the increase was a result of money
laundering from drug remittances, but noted that the small
amount of remittances does not follow the pattern of large
indirect money flows through the Spanish enclaves of Ceuta
and Melilla.

6. Comment. As members of the growing immigrant population
continue to find jobs in Spain, remittances will continue to
flow to immigrants' home countries. The inability of the BoS
to accurately track these funds is problematic considering
international and Spanish efforts to track monetary flows.
MANZANARES

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