MiViviendo is one of several new programs in Latin America to tap $46 billion in remittances.

By Lucien O. Chauvin | Contributor to The Christian Science Monitor

LIMA, PERU - Cecilia Hernández has been smiling for a week, jingling the keys to the new apartment she recently received as part of a government-supported housing program here in Lima, the capital of Peru.

"I am probably the happiest person in Peru these days," she says.

The one thing that Ms. Hernández regrets about her new home is that her husband, Dario Juárez, is not around to enjoy it with her and their two children. Hernández and Mr. Juárez have not lived together for eight years, but this separation is exactly what has allowed them to buy the apartment.

Juárez has been in the United States since 1997, sending home money each month to maintain his family. Through an innovative plan inaugurated in December 2004, the Juárez-Hernández family used those remittances as a down payment on the apartment and got a 20-year guaranteed mortgage.

The program, known as Quinto Suyo, is part of a wider effort called MiViviendo (My Home), designed to encourage home ownership by tapping into the estimated $1.7 billion in remittances sent home annually by nearly 2 million Peruvians living abroad. And it's just one of several plans throughout Latin America aimed at leveraging the nearly $46 billion that migrants sent to the region last year.

"This program gives families an opportunity to take full advantage of remittances," says Carlos Bruce, Peru's minister of housing, construction, and sanitation. "Remittances are generally used for rent, and rent is an expense that generates no return. This program offers a return, which is home ownership."

To qualify, a family member in Lima simply opens an account at one of four participating banks. The person abroad begins depositing a set amount in an overseas branch for six months to accumulate a down payment equivalent to 5 percent of the home's value. The mortgage is then approved and guaranteed by the government.

While Hernández and 11 other families were the first recipients of apartments at a June 20 ceremony, there are 2,000 accounts opened in the Quinto Suyo system with approximately $1.5 million deposited toward down payments on homes since January.

"We estimate that investment of 5 percent of remittances in this program would translate into the construction of an additional 10,000 new housing units annually," Mr. Bruce says.

Although skeptical about the program at first, local banks are now eager to have a role in it. Helping change their view has been the repayment rate within MiVivienda. While the average annual default rate for regular mortgages is 3 percent, it is only 0.3 percent in MiVivienda and similar programs, according to statistics from Banco Wiese Sudameris. Repayment is stimulated by the government, which offers a 20 percent discount on monthly payments if the first six monthly payments are made on time.

The Peruvian government is not alone in looking at new avenues to increase the value of remittances. To the north in Ecuador, Banco Solidario has programs for expatriates living in Spain and Italy. Called "My family, My country, My return," the plan allows people sending money home to decide how it is used - whether for a mortgage, education, or a special certificate for retirement. Since inaugurating the plan in 2002, Banco Solidario has made 1,631 loans and handed over 110 houses.

In Mexico, one state matches every dollar sent home in remittances with three dollars in government funds, provided the money is earmarked for local development projects. As well, in March the Mexican government received a grant from the Inter-American Development Bank (IADB), which through its "Remittances Action Plan" is looking to create productive ways for Latin American nations to take advantage of remittances.

The IADB estimates that people from Latin America and the Caribbean living abroad sent home $45.8 billion in 2004, representing a 15 percent increase over the previous year. Remittances are a mainstay of economies in countries like El Salvador and Haiti, where the $1 billion sent home is equivalent to 25 percent of the island nation's gross domestic product.

Mexico is the principal recipient of remittances, receiving $16.6 billion last year, equal to all foreign direct investment and nearly 80 percent of income earned from oil exports. Brazil is a distant second with $5.6 billion. Using Mexico as a bellweather, remittances could grow even faster this year. Mexicans living abroad sent home $5.6 billion in the first four months of the year, representing a 19.1 percent increase over the same period last year.

In Peru, Bruce says that that Quinto Suyo could be a model for the rest of Latin America.

"We have demonstrated that the state, private sector, and émigrés can form a partnership that is beneficial to families and the nation as a whole," he says.