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Mexico and Central America remittances may increase

Wednesday, May 10, 2017

Subject

Remittances.

Significance

Remittances represent a crucial inflow of hard currency for many countries in Latin America. Mexico stands out as the fourth-largest recipient in the world, while in several Central American countries, remittances are even more important with respect to economic variables such as GDP or exports. With the vast majority of the region’s remittance inflows coming from the United States, the election of President Donald Trump in November has raised concerns for many countries whose economies rely heavily on the inflow of expatriate dollars.

Impacts

  • Amid low economic growth, remittances will represent an important element to alleviate poverty in Mexico.
  • Any significant disruption to remittance flows would have a severe impact on consumption and GDP growth in Central America.
  • As US unemployment falls, foreign-born workers will see wages go up in sectors with tight labour markets, boosting remittances
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