Pandemic did not reduce remittances to Latin America: remittances to the region grew the most

While the crisis caused by covid-19 reduced remittances worldwide by 1.6% in 2020, remittances from Latin American emigrants to their countries of origin grew by 6.5%, the highest in the region. The persistence of the flow despite the serious economic status has to do with the rapid recovery of the United States, where a large number of Latin American migrants reside, especially from Mexico and Central America, and with family cultural values, which lead to special solidarity in difficult times.

"As Covid-19 continues to devastate families around the world, remittances remain a critical lifeline for the poorest and most vulnerable," the World Bank found in the middle of this year. The Covid-19 pandemic has greatly damaged economic and social conditions in much of the world, most notably B in Latin America. Migrants in the US, mainly from Mexico and Central America, were extremely vulnerable to the impact of the economic and health crisis. All of this status led initially to believe that the flow of remittances would decline in 2020. However, while this was the case globally, with a -1.6% decline in remittances worldwide, remittances to Latin America increased to $103 billion, an increase of 6.5%, the highest regional figure. Without financial aid, GDP declines in several Latin American countries would have been even larger.

At the beginning of 2020, several programs of study warned that the pandemic was going to generate high unemployment in the United States, which in turn would have a negative impact on the remittances that immigrants residing in that country had to send. In March of that year, Dialogue expert Manuel Orozco considered that close to one million Latin American immigrants could lose their employment in the US; and a few months later, a report of this Washington-based organisation calculated that up to April remittances to Latin America had fallen by 17% compared to the same period the previous year (they also fell in the second quarter, but then recovered in the third and fourth quarters).

The decline in remittances certainly ended up occurring in most parts of the world. According to the World Bank's data published last May, low- and middle-income countries received officially recorded remittance flows of $540 billion in 2020, a drop of -1.6% compared to 2019. The big difference was made by Latin America, with growth of 6.5%, followed by South Asia (5.2%) and the Middle East-North Africa (2.3%). There were particular declines in East Asia and Pacific (-7.9%), Europe and Central Asia (-9.7%) and especially Sub-Saharan Africa (-12.5%). The World Bank forecasts that in 2021, remittances to Latin America will continue to outpace the average: remittances to the region will grow by 4.9%, compared to 2.6% globally.

The good performance, against the odds, of remittances sent to Latin America, largely from the United States, can be seen in the amounts sent to Mexico. According to a study by BBVA Research, in 2020, 40,607 million dollars arrived in Mexico, representing a growth of 11.4% and a fifth consecutive record-breaking year. In real terms, taking into account the subject exchange rate and the inflationary factor, the increase can be put at 20.6%. To get an idea of the volume of these contributions, this amount exceeded Mexico's federal budget for 2021 for the Ministries of Public Education , Health, work and Social Welfare, Welfare and Culture combined. The geographic proximity of the two countries, which allows for frequent contact, and the fact that Mexicans represent the largest group immigrant population in the United States facilitate these significant monetary transfers.

As for Central America, remittances received in 2020 increased by 5.6%, according to agreement with the Central Bank of Honduras, which compiles its own figures as well as those provided by the central banks of Guatemala, El Salvador and Nicaragua. In the first half of 2021, with economic recovery already underway, the increase in remittances to these countries was 37.1% compared to the first six months of 2020. The four nations received a total of $23.683 billion in 2020: $10.178 billion for Guatemala (up 6.4 per cent), $5.918 billion for El Salvador (4.8 per cent), $5.736 billion for Honduras (3.9 per cent) and $1.851 billion for Nicaragua (10 per cent).

Reasons

The persistence of remittances from Latin American immigrants residing in the United States, even in times of crisis, may be based on cultural, economic and political factors. One of the main values of the region is family commitment, which is particularly supportive in times of special adversity, and this was a cultural factor that helped to maintain the flow of remittances. Even when many migrants in the United States had suffered reduced income or fallen into unemployment, they continued to send money to their families in their countries of origin by making their own arrangements budget, setting priorities and preserving some savings.

From an economic perspective, it can be argued that remittances survived because the Economics in the US was not as affected as elsewhere. President Trump's diary put Economics above public health, so that there was both a rapid economic recovery and a high health incidence, with the highest numbers of infections and deaths in the world. In comparison, remittances from Spain to countries such as Bolivia, Paraguay and Peru fell drastically (total remittances to these nations fell -16%, -12.4% and -11.7%, respectively, according to the above-mentioned World Bank data).

At the same time, the ease of being able to send money digitally, through transactions or transfers, has contributed to this phenomenon normally every year. Although it is important to mention that many families prefer to continue sending remittances in cash to their places of origin, countries with a wide banking and telematic network and technologically advanced, such as the United States, facilitate this subject operation.

Remittances represent the main source of income for families from class average and leave in the most economically disadvantaged countries. The dependence on remittances for Latin American families is so great that poverty levels in these countries would be even higher without them. source It can be argued that remittances are the main source of external financing for low- and middle-income countries. They help to prevent economic shocks to countries due to regional slowdowns. For these reasons, remittances contribute to GDP growth in many Latin American countries.

In 2020, remittances accounted for a substantial share of GDP in El Salvador (24.1%), Honduras (23.5%), Haiti (21.8%), Jamaica (21.2%), Nicaragua (15.3%), Guatemala (14.8%) and the Dominican Republic (10.6%). In the case of Haiti, remittances come mainly from the US, but also from the neighbouring Dominican Republic, which hosts a large number of Haitian immigrants; there is also a good issue of Nicaraguan immigrants in Costa Rica, as well as in the US. As for Mexico, despite being the country in the region with the highest remittance income, remittances constitute only 4% of its GDP, due to the larger size of its Economics.