By David Francis, Data Partner Manager, Global Data Consortium
The forecasts were wrong. Very wrong.
Global remittances to low- and middle-income economies reached $540 billion in 2020, falling just 1.6% below the 2019 total of $548 billion, defying projected expectations that the pandemic would diminish overseas workers’ ability to earn and send money to relatives in their home countries, according to new data from the World Bank.
At the start of the pandemic, experts estimated that remittance flows would face a sharp decline. This was largely anticipated, especially in Latin America and the Caribbean where remittances are an integral source of income for households, due to expected losses of employment as a result of COVID-19 pressures on the labor markets in host countries.
However, remittance inflows to Latin America and the Caribbean grew an estimated 6.5% to $103 billion in 2020, according to the World Bank.
The United States was the largest source country for migrant remittances in 2020, at $68 billion, the bank found.
Latin American migrants in the United States are also likely to be employed in essential jobs so could continue working throughout the pandemic. Andrew Selee, president of the Migration Policy Institute, said to a Senior Reporter at Devex that migrants are also more likely to be “flexible” in the job market — accepting a new job even for less pay if it means being able to work.
One factor aiding the spike in remittances has been the accelerated shift to digital over traditional walk-in store traffic during the lockdowns that closed agent locations. Even as job losses increased among individuals sending money overseas, the demand from recipients kept money flowing. Digital channels, like mobile apps promoted by startups such as TransferWise and non-banks like PayPal, kept money moving.
The United States supported the increase in remittance flows to countries such as Mexico (the biggest recipient), Brazil, Guatemala, Dominican Republic, Colombia, El Salvador, Honduras, and Jamaica.
Instead of collapsing, remittances to Mexico topped $4.15 billion in March 2020, the month the pandemic was declared, the highest amount ever sent from the United States to Mexico by migrant workers in a given month. This amount was also up 2.6% from the same period last year, according to Alberto Ramos, head of Latin America economic research at Goldman Sachs Group Inc., in Wall Street Journal report.
Mexico also received $3.53 billion in remittances in July — most from the United States — a 7% increase over the same month in 2019 and the third-highest level on record, Mexico’s central bank data showed.
Some economists attribute this increase to migrants’ fear that their incomes would be reduced in their home countries, causing them to send savings to their families. Others point to migrants’ recognition of the increasingly dismal conditions for their families in Mexico, leading to an uptick in money transfers. It was significant, too, that the dollar was 13% stronger against the peso than the prior year.
“I think, initially, it was a surprise,” Ismael Plascencia, faculty director of business at the Universidad Autónoma de Baja California, said about the rise in remittances in a Los Angeles Times article. “But it makes sense. People in the United States are very worried for their families in Mexico — for their health — that’s why they are sending more money.
For instance, a municipality of about 18,000 inhabitants in Jantetelco, Mexico took in about 25% more in remittances between January and September 2020 than in the same period in 2019, according to central bank data. That equated to around $425 per person – or to almost two months’ worth of Mexico’s daily minimum wage.
Some Jantetelco residents said they used remittances to pay for everything from construction and renovation of homes damaged by a 2017 earthquake, new cars, appliances and crop seeds, to coming-of-age parties, according to a Reuters article.
Other Latin American and Caribbean Countries
Multiple Latin American and Caribbean countries have also registered record levels of remittance inflows during COVID-19.
Brazil registered a record $317.6 million in August 2020.
Colombia registered a record $715.9 million in March 2020.
Dominican Republic registered a record $827.7 million in July 2020. Additionally, in June, remittances sent to the Dominican Republic were up by 25.7% compared to the same month in 2019.
El Salvador registered a record $571.4 million, and Guatemala registered a record $1.1329 billion in October 2020. Both countries’ remittance levels were up by almost 10% compared to 2019 levels.
Finally, remittances sent to Honduras were up 15.2% during the pandemic.
With global growth and U.S. fiscal stimulus expected to rebound further in 2021 and 2022, the World Bank estimates global remittances to low- and middle-income countries to increase by 2.6% to $553 billion in 2021 and by 2.2% to $565 billion in 2022.
About: Global Data Consortium is a data-as-a-service company that delivers real-time, locally sourced identity and business verification for financial institutions, age restricted services, ecommerce, regtechs, and more around the globe. From swift customer and business identification for online account opening to identity verification for global money transfer to verifying ages for online gaming and age-restricted commerce, our local data providers reach deep into their markets to find unexpected sources of identity information, confirming anyone from thin-file clients to prominent persons of interest. Beyond the product itself, our Consortium of data providers, channel partners, and customers supply a continuous flow of knowledge and meaningful connection.
Source: Global Data Consortium