Rising online banking transfer volume to Central and South America
The lockdown in the US has led to a rising transfer volume for bank remittances towards the south.
In the first six months of the year, remittances from the United States to Mexico totaled $ 19.1 billion, an increase of 10.4% compared to the previous year, according to the central bank Banco de México. That included a monthly record $ 4 billion in March - the month the virus was first discovered in the country. There were also positive trends in the Central American countries of Guatemala, El Salvador and Honduras. In Guatemala, remittances rose 1.4% year over year between January and July. While a slump in transfers in April weighed on the total, remittances rose 9.2% and 13.8% year-on-year in June and July, respectively, with an upward trend for the rest of the year. Next door in El Salvador, while cumulative remittances were down 4.7% year over year in the first seven months of the year - largely due to a 40% drop in April - payments into the country rebounded sharply in June and July saw year-over-year growth of 9.8% and 14.1%, respectively. Similarly, remittances from Honduras also fell 3.3% between January and July - reflecting a sharp decline in April - but grew 15.2% and 1.2% year over year in June and July, respectively . The results are in stark contrast to the predictions made at the beginning of the year. In April, the World Bank forecast that remittances to low- and middle-income countries would decline 19.2% in 2020, the largest decrease in history. This was largely based on fears that the economic downturn and health situation would leave many migrants unemployed or, in some cases, force them to return to their home countries. Mixed global picture Although remittances to some Latin American countries have been strong, the global trend is mixed. Bangladesh and Pakistan received record inflows in fiscal year 2019/20 - which ended in June and included the peak pandemic months of March and April - with July being a record for a single month at a total of $ 2.6 billion. In contrast, however, countries like the Philippines, Tajikistan and Brazil have seen double-digit declines in remittance flows since the virus outbreak. One explanation for the positive numbers in some Latin American countries is that a large proportion of migrant workers are US residents. According to Pew Research, Mexico is the largest recipient of money transfers from the US, with Guatemala, El Salvador, the Dominican Republic, and Honduras also making the top 10. Although the US foreign-born Latin American unemployment rate was 13.5%, slightly higher than the national average of 11.2% in June, there are some sectors of high demand that have a significant proportion of the immigrant workforce, including construction, agriculture, food retail and delivery services. In addition, documented workers are entitled to benefits from the US government's state unemployment programs, so workers can continue to send money home. Another important factor is the shift in the value of currencies. For example, the Mexican peso has lost around 19% against the dollar since late February, which means that all money transfers sent home in Mexico in the past few months have been inflated. Importance of remittances The flow of remittances will be a critical factor for many emerging economies as they continue their recovery from Covid-19 and the economic deadlock that it entails. For many, remittances from overseas citizens make up a significant proportion of GDP, as in Tonga (37.6%), Haiti (37.1%), Kyrgyzstan (29.2%), Honduras (22%), El Salvador (21%), Guatemala (13.1%) and the Philippines (9.9%) can be seen. Given the World Bank's predictions that FDI in emerging markets is expected to decline 35% this year, remittances are likely to be even more important in 2020. As economic growth is also expected to slow significantly in the emerging markets this year, the steady flow of remittances will be a decisive factor in ensuring that many families can continue to pay for essential goods.