Can Diaspora Bonds be Used in the Caribbean?

Abstract

work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. AbstractMany independent countries in the Caribbean have large stocks of migrants abroad who send remittances to relatives in the homeland. Most Caribbean migrants reside in four principal host or remittance-sending countries: the United States, Canada, the United Kingdom, and The Netherlands. Remittances constitute more than 5 percent of GDP in most countries and exceed 10 percent in the case of Guyana, Haiti, and Jamaica. The transfers help to smooth consumption patterns, alleviate poverty, increase the supply of investable funds, and improve balance of payments. Many developing countries and most Caribbean states are fiscally constrained and have limited access to private international capital markets. Given substantial remittance inflows worldwide (US$413 billion in 2014 compared with US$135 billion in foreign aid in the same year), the governments of remittance-receiving countries wonder how some of its migrants' savings could be tapped to bridge financing gaps. One means would be for governments to issue a diaspora bond with a submarket rate of return that targets patriotic migrants who want to help their home country grow and prosper. This paper defines diaspora bonds, discusses their performance in the postWorld War II era, and reviews the critical steps and conditions for successful issuance and subscription. The characteristics of selected Caribbean states are then analyzed to determine suitability for possibly using this financial instrument. JEL classification codes: F22, F24, G23

Racial capitalism, coloniality and the financialization of Caribbean remittances

“…Remittances in this regard have restored the capacity of many households to exercise a degree of autonomy over their lives in the face of crushing forms of debt-related austerity. Remittances have also afforded some of the region's governments greater room to exercise expenditure choices over expenditures that would otherwise have been subject to the conditional lending requirements of agencies like the IMF (Wenner, 2015).…”

“…Israel and India are often cited as countries that have successfully utilized this financial instrument to raise capital. In the case of Israel regular bond issues since 1951 have raised over USD32 billion, while in India approximately USD11 billion was raised over the course of three bond issues in 1991, 1998 and 2000 (Wenner, 2015). Often yielding lower returns, international financial investors would typically not be attracted to these types of securities.…”

“…While most who write about diaspora bonds focus on their potential as a source of much needed capital (Ketkar and Ratha, 2009; Wenner, 2015), few question the logics upon which diasporic bonds are built and the racial imaginaries that animate them. It remains ironic that although dominant neoliberal discourses encourage populations to behave like homo-economicus, these instruments with their lower rates of return and higher levels of risk require diaspora populations not to behave like rational economic actors at all.…”

MIGnnovación: la oportunidad del sector privado y la sociedad civil ante el desafío migratorio en América Latina y el Caribe, Edición 2023

“…debido a la crisis de la COVID-19. El BID ha explorado las posibilidades que ofrecen estos bonos de la diáspora para países del Caribe57 .…”