US elections are key for LA economies that depend on remittances: Fitch

Why is it important?

The potential disparity in immigration policies between the Republican and Democratic administrations could significantly affect Central American countries, which rely heavily on remittances from the United States.

Key quotes

“Central America is highly vulnerable to United States immigration policies, since remittances finance a large component of its economic activity,” Fitch Ratings said in a note.

In countries like El Salvador and Nicaragua, remittances currently represent more than 30% of their GDP, the rating agency said, adding that Mexico is also one of the largest recipients of remittances globally, where inflows have increased significantly. constant in the last decade to about 3.5% of GDP, from 2%.

What do the figures say?

Remittances to Nicaragua have tripled in the last five years, while those directed to other countries, specifically El Salvador and Jamaica, have slowed considerably.

A study based on data from the US Census of Current Population showed that a 1% increase in household income in the country translates into a 0.2%-0.3% increase in remittances sent abroad.

Context

The US election could usher in changes to immigration policy, as Donald Trump’s campaign signals willingness to restrict border crossings and increase deportations, while Kamala Harris’ potential administration would aim to pass bipartisan legislation. to reform the asylum process and limit the temporary stay permission of immigrants.

The political changes could significantly affect migrants and Central American economies that rely heavily on the money they send home from the United States.