The Latin American region’s remittance market has been among the hardest hit by the economic fallout from the COVID-19 pandemic.
According to the World Bank, Latin America and the Caribbean will suffer a decline of 19% in money transfers this year. The expected drop interrupts upward momentum that the region was experiencing in recent years, with remittances rising more than 8% to nearly $100 million in 2019, according to The Dialogue.
Argentina and El Salvador are two of the hardest countries, both of which are supported by Omnex Group-owned Sharemoney for money transfers.
Argentina
According to Pew research, Argentinians received $135 million in remittances sent from the United States last year. Although it is a far cry from Mexico’s $30 billion in remittances, it surpasses money transfers sent to Venezuela in the same period.
While both the Argentinian and Venezuelan economies are in shambles, with both countries suffering from some of the highest inflation figures not only in the region but in the world, the locals have learned how to lean one another during this difficult time.
A trend has emerged in which Venezuelans — whose pensions won’t even buy them a loaf of bread — are emigrating out of the country to Argentina, where they were finding some opportunity before COVID-19 hit.
According to Aljazeera, more than 100,000 Venezuelans have fled the country for Argentina in search of employment in the gig-economy, where they can find high-tech, part-time jobs. However, since the pandemic hit, things have only gone from bad to worse.
Equal Times features Isaac Cubillan, who left the beaches of Venezuela for Argentina after struggling to make ends meet — despite juggling two jobs and having earned a chemical engineering degree.
Now, Cubillan works as a delivery driver in Buenos Aires (which incidentally is where most of the country’s coronavirus cases have surfaced), joining the many who have flocked to gig-economy work.
As of June, he was still sending money home to his family. Those money transfers have become vital to the survival of his parents, even though both of them work in Venezuela. He told Equal Times:
“I always try to send home double or triple the minimum salary in Venezuela.”
Cubillan says he sends as many as three money transfers to support his family each month, which they use to buy basic items like groceries.
According to Cubillan, not sending money home is out of the question. His family is one of the lucky ones.
Latin American Region
According to The World Bank’s outlook, the Latin American region, more broadly, is poised to suffer more than a 19% decline in remittances this year vs. 2019 levels, to $77.5 billion.
If true, it would represent the “sharpest decline in recent history,” the World Bank said in its report.
Manuel Orozco, director of the migration, remittances and development program at Inter-American Dialogue, told IPS that the drop translates to 6 million households (out of the 30 million that depend on money transfers), that will have to look elsewhere for income.
Money transfers to Latin America represent 50% of total income for families who wait on these payments each month for their very survival. The average transaction size of these transactions is $212 each month.
When times are good, the funds give the recipient families the opportunity to save twice as much money than the average family in the region. When times are bad, however, the slowdown in money transfers threatens to shrink the economy while bolstering the poverty rate in the interim, especially for fragile economies like that of El Salvador.
El Salvador
The predictions for lower remittances this year are in, and El Salvador is already seeing evidence of the worrying trend. According to a report in The Wall Street Journal, the Central American country saw a decline of 40% in money transfers year-over year in April amid the COVID-induced lockdown and soaring unemployment numbers. This has jeopardized the very survival of poverty-stricken families living in the country.
The Journal article spotlights an 89 year-old woman, María Graciela Barrera, who lives in the slums of El Salvador where even her basic needs are not being met. With the onset of COVID-19, her family members living in California lost their construction jobs, which has left them unable to send the monthly payments of $50 that were a lifeline to Barrera and her two grandchildren.
Now she is forced to beg for food and rely on charitable donations. Dino Safie, whose charity Solidaritón has been a lifeline for people like Barrera, told the Journal:
“In some rural areas, no remittances means no income, not even for food. When you deliver to one of them, six neighbors appear begging for help.
Barrera’s story is not unique. While in some cases remittances have stopped altogether, in other instances the amount that migrants can send home has been slashed and varies from month to month, depending on the work opportunities.
Government data reveals that in El Salvador, one-quarter of the population lives abroad, most of whom reside in the United States, with more than $2 out of every $10 getting sent back to the country by way of remittances. Salvadorians depend on remittances more than any other country in the Western Hemisphere with the exception of poor Haitians.
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Fueling the emigration trend translates to a lack of investment into social programs such as healthcare and education, leaving those who are able to flee to fill in the gap where the government leaves off. In 2019, money transfers to El Salvador exceeded $5.6 billion, outpacing both foreign investments and goods exported by the country.
While the latest unemployment figures in the U.S. were higher than expected, the unemployment rate remains in the double-digits, hovering at 11.1% in June. The Hispanic community is taking much of the brunt of it, with an unemployment rate of 30% that could translate to a 36% decline in remittances to El Salvador in 2020, according to estimates.
Meanwhile, Latin Americans are looking ahead toward a brighter future, one in which the International Monetary Fund is predicting the global economy will expand by nearly 6% in 2021, including a 3.4% increase in Latin America, where remittances are projected to rise at a similar pace.
Image Credit: latin americans rely on remmittances by Pixabay
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