US embassy cable - 04MADRID3163

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