Sustained Remittance Growth in 2022

˙ Migration, Remittances & Development

 

In the wake of the Covid-19 pandemic, remittances have become a much more important source of income for many people in Latin America and the Caribbean. It is projected that the growth rate will reach 14 percent in 2022 to nearly US$150 billion, equivalent to 5 percent of the gross domestic product in Latin American and the Caribbean countries.

2021-2022 Data Overview

Source: Central Bank of each country (to June with projections); DHS, and money transfer company proprietary data. Projections are based on looking at trends in previous years for the respective Q3 and Q4.

  • Overall, flows of remittances have grown each year since 2018 and are projected to continue growing in 2022.  
  • For many countries of origin, the growth rate of remittances slowed between 2019 and 2020, likely due to constraints of the pandemic; however, these rates spiked in 2021 and are projected to show two-digit growth in 2022 though in a lower pattern. This is with a few exceptions:
    • Mexico has realized significant increases to remittance growth rates since 2020.
    • Caribbean countries, specifically Haiti, Jamaica, and the Dominican Republic showed significant increases in remittance growth during 2020 and 2021 but are expected to have net decreases in remittance flows during 2022.  
  • Nicaragua is expected to have a significant increase in remittance growth rates in 2022.  
  • Salvadoran remittance growth rates have remained relatively stagnant with a large spike in 2021. Data on annual remittance transactions among the Salvadoran diaspora indicates that the remittance growth in 2020 and 2021 is likely due to people sending more money as opposed to an increase in the number of people remitting. 

Annual Remittance Growth to 24 Latin American and Caribbean Countries

Although the Covid-19 pandemic has also disrupted migration flows and enforcement, increases in migration explain largely the increases in remittances.  

For at least ten countries where irregular migration is more than two thirds of all entry to the United States, we find a positive correlation to remittances.   

The chart below points to the correlation between increases of migration and remittance transfers.  Interviews with migrants demonstrate that people start sending money between three and six months after arriving.  The chart below depicts the correlation with a three-month lag of migration to remittance transfer (we use logged values to normalize the trend between small and large values of people and money across nationalities). 

Migration and Remittance Transfers

It is important to note that for Central American countries in 2022 growth in irregular entry will migrant be higher than the pattern of apprehensions.1 In turn, irregular entry will drive some of the growth in remittances. Remittances in the form of person-to-person transfers are projected to increase to over 5 million by the end of 2022.

*18% irregular border crossers plus percent of apprehended but released following administrative procedures in 2022. 

Remittances to Mexico will increase 18 percent in 2022, almost as much as the region’s 14 percent projected growth. The case of Mexico is one about a continued migration uptrend which showed signs of increase since 2018. By 2022 Homeland Security is expected to reach nearly 900,000 apprehensions of Mexicans—the first six months show a 30 percent increase from 2021. Overall new migration, additional to legal authorized entries through H2 visas, family unification, will add 350,000 Mexicans, 70 percent of which will send money in 2022.   

The average amount sent among all Mexican migrants is at least 3 percent more than the year before. Together with new migration, Mexico will receive a total US$60 billion from Mexicans abroad. That volume is now 4.75 percent of Mexico’s national income.  

Finally, many Mexicans who would have returned to Mexico, are staying longer in the United States and continue to send money.   

Altogether these three factors explain the increased inflow of remittances to Mexico. The logic behind these numbers stride from internal dynamics in Mexico due to slow modernization and growth, continued polarization and family unification.  Other intervening factors include increased cost of living. 

Remittances to Jamaica increased by nearly 20 percent in both 2020 and 2021. Unlike Mexico, this is likely due to increased remittance flows as opposed to increased migration. Based on immigrant and non-immigrant visa issuances have been declining since 2018, likely due to the Covid-19 pandemic. Non-immigrant issuances had a significant drop in 2020. While there is limited information about illegal entry and apprehensions for Jamaican migrants specifically, growth in is likely not large enough to explain the consecutive increase in remittances.  

As the pandemic slows, Jamaican migration is increasing. Non-immigrant visa issuances increased in 2021 but still approximately 38 percent lower than pre-pandemic levels. Despite this, remittances are projected to decrease by 1 percent by the end of 2022. This further supports that the increase in remittances is not linked to increased migration and also suggests that it was a temporary increase. Increased remittances were likely as a result of temporary assistance for family members in Jamaica during the pandemic and will likely slow as the economy picks up. 

View the following PDF for charts depicting the data used in this post. It begins with comparative charts then continues to individual charts for each country.

RELATED LINKS:

Why Do Remittances to Mexico Continue Breaking Records?

Interpreting Increased Remittances to Latin America and the Caribbean

Family remittances and continued growth


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