WASHINGTON - The World Bank says the United States (US) economic slowdown has affected remittances to the Caribbean and Latin America.

It said in a report entitled ‘Remittances and Development: Lessons from Latin America’ that although funds transferred to the region amounted to almost US$60 billion during 2007, the figure is "very small" when compared to an annual average rate of 19 percent between 2000 and 2006.

"The role of remittances in the region cannot be overlooked when they represent about 70 percent of foreign direct investment flows," said Pamela Cox, the World Bank’s vice-president for Latin America and the Caribbean region.

"They help poor families increase their savings and keep children in school."

The authors of the report, Humberto López, World Bank lead economist for Central America, and Pablo Fajnzylber, World Bank senior economist for Latin America and the Caribbean lamented the fall in remittances during 2007 and called for urgent linking of these funds to financial services in order to improve "the long-term impact of remittances on development".

The report found that some of the positive effects of remittances include higher savings, better access to health and education, increased macroeconomic stability and entrepreneurship, and reductions in poverty and social inequality.

It also showed that that the money which migrant workers send back to their home countries is linked to lower poverty levels and improvements in education and health indicators.

"But things could dramatically change if governments don’t take urgent actions to facilitate remittances flows and to maximize their development impact," the report said.

The document further highlighted some important policy challenges associated with remittances, such as brain drain, problems of overvaluation of the real exchange rate and loss of external competitiveness.

The report also found that remittances primarily help the poorest segments of society in some countries, while in other countries like Haiti they tend to be more beneficial to the middle class.