Shifting economic changes impacting Latin America through remittances

Latin America has a fundamental lifeline with remittances, no question. The latest statistics clearly indicate the U.S. is a prime sender of income to the rest of the Americas, which really isn’t a surprise at all. In fact, the issue is so prevalent, the White House is looking to push almost $1 billion in foreign investment to reduce the need for people to migrate to find income in the U.S. and instead earn back at home with job opportunities supported by that foreign aid. However, most experts think that’s unlikely to make any kind of ground-shaking change anytime soon.

Financial International Relations

Remittances are a significant support element in Latin America. The economic impact of money transfers to Latin America today represents anywhere from 18 to as much as 26 percent of a national economy, depending on which country one looks at statistically. Any kind of move to disconnect this financial channel would likely disrupt the political stability of the Central and South American region dramatically. For example, remittances to three major Central American countries combined represented $34 billion in 2022 alone. That’s almost as much as what was sent to the Philippines in the same year.

Misguided Policies Fail to See the Real Impact of Workers

The pandemic period was probably the most dramatic example of an economic slowdown that remittances can cause, especially when many workers were laid off in the U.S. and had to find work elsewhere due to social distancing restrictions and the closure of in-person businesses. The drop in economic inflow was massive, as much as almost 10 percent of some countries’ GDP. More importantly, unlike foreign aid, remittances are worked for and earned. They represent millions upon millions of hands contributing to the U.S. workforce in manufacturing, agriculture, services, delivery, food and hotel services, and a lot more. As England found out during the pandemic, the lack of migrant workers can literally stop food being delivered to grocery stores as fields stop being tended for harvest. That impact compounds exponentially across construction, shipping, and most industries that need high numbers of people to operate.

There are plenty of criticisms that migrant workforces take away jobs from local labor pools. However, in the U.S. that perspective has been proven wrong repeatedly. Again, COVID highlighted vividly that without the people who are willing, support jobs go unfilled and vacant. The hospitality service was the hardest hit by this reality in 2020 and 2021. Some business owners were creative enough to invest in their people during the lull, and support them while they went to school and developed even more skills for the business to use. Many, however, just cut their payroll altogether. Now they can’t find anyone to fill their positions as in-person demand returns post-pandemic.

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Everyone Feels the Bite of Inflation

Now, inflation is the biggest challenge for everyone, whether working to send money home or just to live and grow. The nefarious nature of inflation eats away at everything people do, from buying fuel for vehicles to travel to groceries that feed the dinner table. The impact is felt across the board, and most by people who have to make every dollar count as well as send them back to family in their home country. In some cases, the inflation levels have been so bad, workers have found it useless to stay and have returned back to Latin America, again reducing remittance levels further.

Global Feels Smaller and Closer Now

So, if you happen to see a money transfer site online and, in English wording, you also see marketing to Spanish-speaking customers with messaging like, “Aplicación para enviar dinero al extranjero,” understand the money transfer world is more than just sending a few dollars here or there. It’s a fundamental life stream for families, communities, and even countries. The digital world is simply the latest adaption to a linked relationship the U.S. has had with the Americas for decades. While pandemics, foreign aid, and inflation are having impacts, remittances will continue to be fundamental to the interconnectedness of the North and South Americas.