New migrants drive remittance growth for Central America

The arrival of a little more than half a million Central American migrants to the United States in 2022 is a driving force behind the growth of remittances, which this year are estimated to reach an increase of some US$5 million in the northern region of Central America.

The estimate comes from a study presented by the expert on remittances and development of the Inter-American Dialogue, Manuel Orozco, in Washington, who crosses data from official information on transfers made in the first half of this year with the context of legal and illegal migration in the United States from the Northern Triangle of Central America.

“It is important to note that for Central American countries in 2022, the growth of irregular entries will be greater than the pattern of apprehensions. In turn, irregular migrant inflows will drive some of the growth in remittances. Remittances will have increased to more than 5 million person-to-person transfers by 2022,” the study states.

This expert explains to Voice of America (VOA) that this can undoubtedly be considered one of the factors for the sustained growth of remittances to the region, even though this year, the growth rates are expected to adjust to the pattern observed before the pandemic.

Guatemala, Honduras, and El Salvador showed an upturn in 2021 that was well above double digits after a year of relative stagnation in 2020.

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

“What 2022 reflects is a readjustment, but basically in a context of continuity of sending money which is influenced by two factors and that is that what is sustaining the money transfers is migration, the number of people who continue to leave is the one who is busy sending money, and that is what 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 working in the United States -especially- varies from one country to another, as well as the amounts in the transfers, which would be associated with the cost of living in each Central American nation.

Guatemalan immigrant Gil Juárez, a Washington resident, fits these average patterns by making about two monthly cash transfers for his family in Guatemala with a monthly average of US$500, he tells VOA.

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

For now, this immigrant works two shifts in the US capital to compile these resources and manages to maintain the aid while at the same time resenting the increase in the cost of living in the United States, which has registered an inflation rate 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, sending almost US$500 a month in transfers, followed by Salvadorans with an average of US$370 a month and Hondurans with an average of US$330.

But these values have also been increasing, suggesting that immigrants adjust their disbursements to the increased cost of living in their countries of origin.

Salvadorans, for example, went from sending an average of US$320 in 2019 to US$370 today, and Hondurans, who in 2019 transferred about US$280 monthly to their relatives and this year are paying US$330.

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

“One sends according to the cost of living in their country more or less, showing how a Guatemalan immigrant sends more than a Salvadoran. There is an increase in remittances although wages are not growing with the same intensity (in the US), but the commitment to send more grows,” said Orozco.

MULTILATERALS SEE “OXYGEN” IN REMITTANCES TO THE REGION

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

The multilateral organization estimates that by the end of 2022, cumulative global remittances will amount to some US$630 billion. “This follows a near-record 8.6% recovery in 2021,” the WB explained in its Migration and Development Review.

Last year, Latin America showed the robustness of these inflows exceeding US$131 billion in cash transfers to the economies of countries in the region, with Central American countries showing the highest peaks.

“Among the countries that registered double-digit growth rates were Guatemala (35%), Ecuador (31%), Honduras (29%), Mexico (25%), El Salvador (26%), Dominican Republic (26%), Colombia (24%), Haiti (21%), and Nicaragua (16%).

The multilateral summarized that the recorded flows to Mexico include funds received by migrants in transit from Honduras, El Salvador, Guatemala, Haiti, Venezuela, Cuba, and other countries.

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

Economist Isaac Cohen comments to VOA that remittances have represented the largest source of assistance and direct cooperation to developing countries such as those in Central America and that they are “unsurpassable” funds in their ability to impact the improvement in quality of life for families.

“Remittances are the best way to administer direct aid to people. It has been 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 with remittances,” Cohen explained to VOA.

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

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

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

“This demonstrates these flows’ capacity to reduce recipient families’ poverty and support the emergence of urgent needs. In other cases, they also show the capacity 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 living standards for its inhabitants,” they said.

With information from VOA