Manuel Orozco: Migration, economic recovery and COVID-19

Alejandro at his family’s small shop in San Pedro Sula, Honduras.

International migration has continued to grow more complex, and globalization fosters an increasingly interconnected world and global economy.

Manuel Orozco, Ph.D., has been on the forefront of research and programming related to trends around migration and economics for more than 20 years. As Director of the Center for Migration and Economic Stabilization, Orozco leads Creative’s expertise in the intersections between migration flows and the stabilization and recovery of fragile economies.

In this Q&A, Orozco shares some insights on migration, remittances and the impact of COVID-19.

Q: How did you first begin working in migration? What has kept you committed to this topic throughout your career?

Manuel Orozco: My work on migration is informed by personal and professional experience. I am a product of the Cold War, leaving Nicaragua for Costa Rica in 1983 due to political reasons. That experience and an intellectual interest for all things international led me to study African refugee flows and Salvadoran and Guatemalan refugees in Costa Rica. One critical issue that kept my attention on migration was the understanding that labor and even forced migration is the human face of globalization. The economic ties that people forge between families and societies, or what I call “transnational economic engagement,” have significant impacts and answers to many development challenges.

Q: Tell us about your work focusing on remittances.

Orozco: My work on remittances stemmed from observing how people materially express their family ties by sending money to relatives. The first study I conducted on remittances was in 1995 and sought to understand how migrants from countries in conflict reconnect with their homelands. Since then, my work has aimed to understand how person-to-person transfers involve — and have evolved into — an intricate ecosystem of global payment value chains that create wealth between the remittance origin and destination. In turn, I have worked in more than 100 countries with remittance flows capturing between 2 percent (like Mexico) and 35 percent (like Tajikistan or Haiti) of a country’s national income. 

I’m also interested in how this ecosystem shapes a competitive money transfer industry focused on technological innovation, regulatory compliance of financial activities and low-cost services. Remittances are a financial transaction that represent a portion of a migrant’s income and add wealth to the recipient’s family income. Family remittances increase disposable income among recipients, and in turn increase their savings capacity. In most cases, those savings are kept informally. However, when considering economies of scale, if these funds are formalized, they can serve as a key to unlock many development solutions.

Q: What can remittances tell us about migration as a phenomenon?

Orozco: Remitting and migrating are separate realities. However, remittances reflect migration and globalization. That is, they indicate many of the dynamics in the global economy, including economic asymmetries and labor complementarities between countries, obsolete models of economic growth in one country that increase the probability of migration, and a labor force calculating their economic options. Concurrently, remittances also present themselves as an economic opportunity to increase investments in human capital in the homeland as a means to modernize and increase competitiveness in the global sphere. 

Q: How do you think about migration as a development issue?

Orozco: Migration is a development issue in that it reflects the economic weaknesses and failures in the migrant’s origin country and also because transnational economic engagement offers development solutions. Therefore, the challenge is to set a strategy that leverages the dynamics of transnational ties to create economic opportunities. For developing countries and emerging economies that are increasingly becoming hosts or in-transit stops for migrants, it is also important to introduce economic and social integration programs. 

Q: You talk about migration as not just a result of economic challenges, but also a contributor. Can you expand on how migration can help and harm local economies?

Orozco: Migrant transnational economic ties, like remittances or nostalgic trade, bring untapped wealth that once leveraged, creates solutions for greater economic growth and complexity. For example, savings formalization increases financial access and liquidity in the financial sector, funds that can be mobilized into credit in the local economies to increase productivity. Similarly, investments in nostalgic trade businesses can lead to greater economies of scale in exports, expanding production and value chains to markets outside the host country. 

However, when the growth in outbound migration exceeds demographic and labor force growth across age groups, it can adversely affect a country’s economy. This situation is particularly complex when no development policy interventions are made to leverage the flows from remittances, the demand for nostalgic commodities, or migrants’ capital investments. For example, in countries where weak or fragile economies give way (by neglect or lack of expertise) to continued irregular migration, that outward migration is unsustainable due to other countries’ border controls. Eventually irregular migration is reduced and inflows of funds also fall, causing further economic decline.  

More importantly, in the absence of policy interventions to capitalize on the flows of remittances, currency artificial appreciations can occur, what is referred to as the “Dutch disease,” a condition by which those productive sectors lose further competitive capacity. 

Q: How you foresee COVID-19 impacting global migration?

Orozco: The impact of COVID-19 in many developing countries will be more devastating in those that are more dependent on the global economy (that is, on exports, remittances and tourism) and highly informal sectors. Looking at evidence from the 2009 global recession, outbound migration emerged years after an economic recovery that wasn’t enough to rebound from compound economic losses. This outmigration was higher in those more externally dependent countries with informal economies that employ more than two-thirds of the labor force.

Q: What is the role of the development community to respond to the long-term effects of COVID-19 as they relate to migration?

Orozco: The development community is strategically positioned to offer technical expertise and financial collaboration to focus on migration prevention programs and economic stabilization designs that create conditions to mitigate further deteriorations. Development players are also well-positioned to integrate the reality of migration as a factor that intersects with global system forces and faulty economic performance in developing countries. 

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