New migrants drive growth of remittances to Central America

The arrival of a little more than half a million Central American migrants to the United States so far in 2022 is an engine that drives the growth of remittances, which are estimated to reach an increase of some 5 million dollars in the region this year. north of Central America.

The estimate comes from a study presented by the expert in remittances and development of the Inter-American Dialogue, Manuel Orozco, in Washington, who cross-references data based on official information on transfers made in the first half of this year with the general context of migrations legally and illegally in the United States from the Northern Triangle of Central America.

“It is important to point out that for Central American countries in 2022 the growth of irregular entries will be greater than the pattern of apprehensions. In turn, the irregular entry of migrants will drive part of the growth in remittances. Remittances will have increased to more than 5 million transfers from person to person in 2022”, exposes the study.

This expert explains to the voice of america This can undoubtedly be considered one of the factors for the sustained growth of remittances to the region, although this year it is expected that the growth rates will adjust to the pattern observed prior to the pandemic.

Guatemala, Honduras and El Salvador they showed in 2021 a rise which far exceeded double digits, after a year 2020 of relative stagnation.

Nicaragua will see an increase in these currencies due to its internal situation and the intense departure of its nationals to neighboring countries and the United States, the expert predicts.

“What 2022 reflects is a readjustment, but basically in a context of continuity in sending money that is influenced by two factors and that is that what is sustaining money transfers is migration, the number of people who continue to leave is the one that is taking care of sending money and is the one that largely explains the growth”, Orozco explains to VOA.

Estimated amounts and countries

According to data compiled for the study in each Central American country, the frequency of money transfers by their relatives who work in the United States -especially- vary from one country to another, as well as the amounts in the transfers, which would be associated with the cost of living in every Central American nation.

Guatemalan immigrant Gil Juárez residing in Washington fits into these average patterns by making about two cash transfers each month for his family in Guatemala with a monthly average of 500 dollars, he tells VOA.

Those funds, he says, are used for the ordinary expenses of maintenance, education, medical care and housing for his family in Guatemala.

For now, this immigrant maintains two work shifts in the US capital to collect these resources and manages to maintain the aid, while suffering the increase in the cost of living in the United States that has registered a inflation that already exceeds 9%according to official data.

According to Manuel Orozco, Guatemalan migrants are the Central American group that sends the most money individually, approaching 500 per month in transfers, followed by Salvadorans with an average of 370 dollars per month and Hondurans are sending an average of 330.

But these values ​​have also been increasing, which suggests that immigrants adjust their outlays to the increase in the cost of living in their countries of origin.

Salvadorans, for example, went from sending 320 on average in 2019 to 370 today, as well as Hondurans who in 2019 transferred about 280 dollars to their relatives monthly and this year they are disbursing 330.

The collection of this information comes from the systematized databases on foreign exchange and remittances managed by the central banks of the Central American countries and other latitudes, which year after year reveal the net remittances received during each cycle.

“One sends more or less according to the cost of living in their country, and that shows how a Guatemalan immigrant sends more than what a Salvadoran sends. (…) There is an increase in shipments even though wages are not growing with the same intensity (in the US), but the commitment to send more is growing,” Orozco points out.

Multilaterals see “oxygen” in remittances to the region

The World Bank (WB) believes that the growth projections for remittance flows will continue to rise this year to an estimated 4.2% for low- and middle-income countries.

The multilateral organization calculates that at the end of 2022 the global cumulative in remittances will amount to some 630,000 million dollars. “This occurs after an almost record recovery of 8.6% in 2021,” explained the World Bank in its review on Migration and Development.

In Latin America, last year showed the robustness of these revenues, having exceeded 131,000 million dollars in cash transfers to the economies of the countries of the region, in which the Central American countries showed the highest peaks.

“Among the countries that registered double-digit growth rates are Guatemala, 35%; Ecuador, 31%; Honduras, 29%; Mexico; 25%; El Salvador, 26%; Dominican Republic, 26%; Colombia, 24%, Haiti, 21%; and Nicaragua (16%). The registered flows to Mexico include funds received by migrants in transit from Honduras, El Salvador, Guatemala, Haiti, Venezuela, Cuba and other countries”, summarizes the multilateral.

The increase in these sources of foreign exchange in 2022 indicates that in Central American countries these disbursements sent by workers will continue to pay more than 20% of the Gross Domestic Product (GDP) in some Central American countries such as El Salvador and Honduras.

The economist Isaac Cohen, comments to the voice of america that remittances have represented the largest source of assistance and direct cooperation to developing countries such as the Central American ones and that they are “unbeatable” funds in their capacity to impact on improving the quality of life for families.

“Remittances are the best way to administer direct aid to people (…) It is proven that families that receive remittances are less poor and no bureaucracy would be able to administer an aid program in this way with the effectiveness that occurs in the remittances,” Cohen explains to VOA.

With this, both the World Bank and the Inter-American Development Bank (IDB) agree that these transfers represent a kind of “oxygen for the economies of the region” that this 2022 has seen the economic crisis worsen due to the global impact it has had. the war in Ukraine.

“On the one hand, the Ukraine crisis diverted global political attention from other developing regions and economic migration. On the other hand, it strengthened the arguments in support of destination communities experiencing a large influx of immigrants,” says Dilip Ratha, lead author of the Migration and Remittances report and head of the World Bank’s Global Knowledge Alliance on Migration and Development.

And “while the recovery of the world economy progresses”, especially in the host territories of Latin American migrants, a greater growth and stabilization of remittance flows is observed, as “an enormous opportunity for the region”, considers the IDB in an analysis carried out by specialists Jeremy Harris and René Maldonado from the regional bank.

“This demonstrates the capacity of these flows to reduce the poverty of recipient families and to provide support when urgent needs arise. In other cases, they also show the ability of migrants to generate savings and accumulate capital that can be converted into productive investments, leading to greater economic growth for the region, and better standards of living for its inhabitants,” they point out.

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