Post-COVID Remittance Rebound in Latin America and the Caribbean Hints at Emerging Trends

Feb 20, 2021
Affiliate disclosure
  • Several countries in the Americas saw strong growth in inward remittance volumes in 2020 after a steep crash in April following the onset of the COVID-19 pandemic;
  • Year-on-year remittances were up an average of nearly 8% in Mexico, Jamaica, Colombia, Brazil, the Dominican Republic, Guatemala, El Salvador, and Bolivia;
  • The rebound can be partly attributed to a rise in digital money transfer methods, migrant worker job security in essential industries, and income support schemes in developed nations.

While the fallout from COVID-19 has wreaked havoc on global remittance flows, a number of countries in Latin America and the Caribbean proved resilient, offering further insights into the extent of the pandemic's impact on recipient countries.

After a marked crash that began in March and bottomed out the following month; remittances destined for Mexico, Brazil, Colombia, Jamaica, the Dominican Republic, Guatemala, El Salvador, and Bolivia all showed strong signs of recovery throughout the rest of 2020.

Compared to 2019, for example, the total value of remittances flowing into Brazil grew by a considerable 15.3% in 2020. This figure was even more pronounced in the Dominican Republic, where year-on-year remittance inflows grew by 16.1%, as well as in Jamaica, where they grew by 19.1%.

Mexico, one of the largest remittance destinations in the world, continued to break records in terms of total annual remittance inflows, topping US$40.6 billion in 2020, up more than US$4 billion from 2019. According to a report by BBVA Research (in Spanish), when adjusted for exchange rate fluctuations and inflation, the 11.4% increase in nominal terms, in reality, reflected a substantially larger 20.6% increase in real terms.

In South America, despite seeing negative 17% year-on-year growth in remittance inflows in 2020, the landlocked country of Bolivia nevertheless mirrored the strong recovery shown by some of its neighbours in the latter half of 2020 after remittance inflows plummeted by a staggering 71.3% in April. Bolivia went on to see positive year-on-year inflow growth in September, October, and November; with each month seeing around 5% growth when compared to the same periods in 2019.

While the increase in inward remittance volumes appears to be most common in the Americas, the trend is not restricted to the region. Further afield, both Bangladesh and Pakistan have recorded similar growth in remittance inflows after an initial drop-off.

The trends stand in stark contrast to those observed in most other nations around the globe, which saw a drop in year-on-year remittance inflows in 2020 amid a major disruption to the flow of global money transfers.

What Drove the Latin America and Caribbean Remittance Rebound?

Prior to the outbreak of COVID-19, many countries in the Latin American and Caribbean regions — most notably Mexico — had already been enjoying a convincing rise in remittances being sent home from citizens living and working abroad. It is very likely that this phenomenon was poised to play out regardless of COVID-19, with the pandemic serving as a hurdle on an otherwise inevitably upward trend.

Nevertheless, there are a number of factors that provide more concrete hints as to what was behind the surge in inward remittances. For example, factors such as the type of employment held by members of the Latin American diaspora abroad, the growth of digital money transfers, and widespread access to social services all provide clues toward why remittances rebounded so strongly, especially in some countries

According to Sergio Recinos, President of the Banco de Guatemala (Bank of Guatemala), a key reason why remittances to Guatemala remained sturdy in 2020 despite the pandemic was that many Guatemalans were employed in industries considered essential in the US, including nursing and care work. As a result, income remained reliable for a large number of migrants despite the turbulence the pandemic caused in the US labour market in 2020.

Remittances destined for Guatemala were up nearly 8% on the year in 2020 despite a crash of more than 20% in April, compared to the same figures from the year before. "Our technical bodies believe that growth will not be as sharp [in 2021] but that they can stabilize at between 8.5% and 11.5%, with a central range of 10%, which would equal US$12.5bn in 2021," said Sergio Recinos in a webinar in February.

According to Tamara Mughogho, Economic Advisor at intergovernmental association The Commonwealth, another major reason why remittance volumes defied expectations in the latter half of 2020 rests with the fact that many migrants were eligible to take advantage of income support schemes and welfare benefits in their countries of residence.

In a December 2020 article for the United Nation's Office for the Coordination of Humanitarian Affairs, Mughogho pointed out further that the unprecedented nature of the pandemic led to greater remittances. "[The] decline in economic activity and employment in home countries could have spurred the rise in remittances, as was seen in Mexico, where migrants in the United States were motivated to help out more in the face of adversity," she said.

Remittances as a Lifeline

The uptrend in remittance inflows to countries in the Latin American and Caribbean world offer an encouraging sign with respect to both the short-term prospects of global remittance flows during the pandemic in 2021, as well as the longer-term prospects for development in recipient countries.

However, warns the International Monetary Fund (IMF), key challenges remain to be overcome before global remittance flows can evade the influence of the COVID-19 pandemic.

"Compared with previous economic crises, this pandemic poses an even greater threat to countries that rely heavily on remittance income," explained the IMF's Assistant Director Ralph Chami on an IMF podcast. "The global nature of this crisis means that not only will recipient countries see remittance flows dry up, they will simultaneously experience outflows of private capital, and maybe a reduction in aid from struggling donors."

According to Chami, it is only through a combination of greater employment opportunities for migrant workers in host countries, as well as more extensive co-operation between international financial institutions and donors that remittances can be protected in the midst of protracted pandemic conditions.

Subscribe to The Monito Briefing to keep on top of key trends in cross-border payments

Image credit: Random Institute on Unsplash

Why Trust Monito?

You’re probably all too familiar with the often outrageous cost of sending money abroad. After facing this frustration themselves back in 2013, co-founders François, Laurent, and Pascal launched a real-time comparison engine to compare the best money transfer services across the globe. Today, Monito’s award-winning comparisons, reviews, and guides are trusted by around 8 million people each year and our recommendations are backed by millions of pricing data points and dozens of expert tests — all allowing you to make the savviest decisions with confidence.

Learn More About Monito
  • Monito is trusted by 15+ million users across the globe.

  • Monito's experts spend hours researching and testing services so that you don't have to.

  • Our recommendations are always unbiased and independent.

Global Impact Finance Ltd
Avenue de Montchoisi 35
1006 Lausanne

Affiliate Disclosure
Instead of banner ads and paywalls, Monito makes money through affiliate links to the various payment service providers featured on our website. While we work hard to scout the market for the best deals, we're unable to consider every possible product available to you. Our extensive range of trusted affiliate partners enables us to make detailed, unbiased, and solution-driven recommendations for all types of consumer questions and problems. This allows us to match our users with the right providers to suit their needs and, in doing so, match our providers with new customers, creating a win-win for everybody involved. However, while some links on Monito may indeed earn us a commission, this fact never impacts the independence and integrity of our opinions, recommendations, and evaluations.