Commodities, Remittances, and Queen Elizabeth II
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The cost of sending money
Queen Elizabeth II and her territories in the Americas
A history of commodity booms
Make sure you check out the comment of the week at the bottom!
If you are a migrant worker and need to send money overseas, then you know how expensive it can be. In 2021, global remittance flows reached $589B; in 2022, they are expected to reach $630B (partly due to a record increase from Ukraine). So, how much are people paying for this service? Even though overall, they have decreased in the last 10 years, fees are still high. Globally, sending remittances cost today an average of 6.01% of the amount sent. And in LatAm? The average fee is 5.6%. Some companies dominating the market include Citibank, Remitly, Walmart2World, MoneyGram, Ria, MoneyGram, and Wise.
Remittances sent to Latin America increased 25% between 2020 and 2021, mainly due to the improved employment situation for foreign-born workers in the United States. The World Bank reported double-digit growth rates in Guatemala (35%), Ecuador (31%), Honduras (29%), Mexico (25%), El Salvador (26%), Dominican Rep. (26%), Colombia (24%), Haiti (21%), and Nicaragua (16%).
These payments are vital for smaller countries such as El Salvador, Honduras, Jamaica, and Haiti—where remittances make up at least 20% of their GDP. However, not all of that money is destined for residents. For example, transit migrants from Central America receive a significant part of the flows to Mexico during their journey north.
The world mourned the death of Queen Elizabeth II last week. In addition to being the UK's longest-serving monarch, she had the second longest reign of all nations in history. And she wasn't just the Queen of the UK; as the 'head of state' of dozens of countries during her rule, 179 prime ministers technically served under her. In the Americas, the UK has a long and complicated history with 21 different former and current territories.
The British Empire started its conquest of the western world in the early 1600s by establishing settlements in modern-day USA, Canada, and many Caribbean islands. This empire expanded into all corners of the world and went on to become the largest we have seen in history, ruling over 458M people at its peak in 1922.
Fast-forward 100 years, the UK is a much different country. It has relinquished control of the countries it once ruled, leading now instead a 'Commonwealth of Nations' where many of the UK's former 'dependencies' choose to maintain ties of friendship and acknowledge the British monarch as the symbolic head of their association. Since Queen Elizabeth II ascended the throne in 1952, 48 former territories (12 in the Americas) have become sovereign states and joined the Commonwealth.
This Commonwealth of Nations was one of the Queen's top priorities. She dedicated her life to diplomacy and maintaining an amicable relationship with Britain's former colonies, embracing their independence. Although much resentment towards the UK's colonialism, you're seldom to find anyone who didn't respect Queen Elizabeth's grace and fulfillment of duty.
Commodity booms happen when a new product use or source of an existing product is discovered. Just like these booms can bring tremendous economic prosperity, they also often leave a lot of pain on their way out. As new technologies emerge that no longer need the product or the product is depleted, global demand can fall sharply and quickly.
The demand for gold during the colonial period gave rise to the first commodity boom in Latin America. Some estimates claim that over 100 tons of gold were taken back to Spain from the Americas, which powered a massive era of prosperity for the country. Our chart shows that as the Spaniards ran out of gold to extract, they turned to silver and enriched themselves from it for the next 100 years.
Also during the colonization of our continent, cochineal dye's discovery in the 16th century kicked off a nearly 300-year boom in Mexico and Guatemala. First used by the Mayas and later the Aztecs, cochineal dye is derived from an insect that is a parasite of the cactus plant. The rich, red color of the dye was far superior to anything available in Europe then, and it soon became Mexico's second largest export after silver. The advent of cheap artificial dye by the mid-19th century brought the cochineal industry to a halt.
So far, both commodity booms of the 21st century have happened in the Andean region. The first started through the "discovery" of quinoa by health-conscious consumers in the rich world. Quinoa, however, has been a staple in the diets of Andean communities for centuries. Quinoa farmers saw a relatively short 8 years of unprecedented prosperity as demand for their product skyrocketed. Sadly, as quinoa gained popularity, production expanded away from the Andean highlands and into more efficient agricultural land, bringing the boom to an end.
The second Andean boom is ongoing thanks to the explosion of electric vehicles, which require lithium for their batteries. How long until a new, more efficient chemical is discovered and this commodity boom ends?
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Comment of the week in response to our cooking channels chart on Twitter. Even though we didn’t claim our list was exhaustive, we would’ve included La Capital had we been aware of it (the host is coincidentally is also from our hometown of Torreon, Mexico!).
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