The Trump effect on family remittances in Guatemala is the main expectation that has been generated after the winner of the presidential elections in the United States on November 4.
The Bank of Guatemala (Banguat) puts a position on what can happen to the income of these currencies, and the trend now is that the flow of growth is maintained; however, they also expressed what may happen in the short term.
As of October 31, a cumulative income of US$17.835 million was counted, equivalent to about Q137 billion 686 million for transfers sent by nationals and representing a growth rate of 8.6 %. The trend is to close this year at US$21.685 million with a growth of 9.5 million, higher than 2023 when it stood at US$19.804 million.
For November, an income of US$1.8 billion is projected and for December in an amount close to US$2 billion, it was reported.
More flow
Álvaro González Ricci, president of the central bank, and the economic manager Johny Gramajo Marroquín explained to Prensa Libre that it is a matter of concern about the announcements that have been presented on the issue of migration during the campaign, in the sense of mass deportations, but clarified that it is something that will not materialize in the short and medium term since the participation of Hispanic employment in the U.S. economy has an important role.
When there is a perception that someone can be deported, you start sending a bigger shipment, and where does this greater flow come from?, from these years of bonanza in the U.S. economy and a labor market where wages rose a lot.
He also mentioned that during a first term of President Donald Trump there were no mass deportations, so that this variable is followed, given the importance of remittances in Guatemala, Honduras and El Salvador, for their participation in gross domestic product (GDP).
Current context
Gramajo Marroquín confirmed that 97 percent of the transfers received come from the United States, and this would be the fourth consecutive year that the economy would be growing above its potential that is estimated to be between 1.8 and 2 %, but during 2021, 2022 and 2023 it has grown above its potential and 2.7 % was last year and for this year by 2.8%.
The labour market has been tight and it is explained that more employment positions are available than workers to occupy them, with data available as of October, and there could be changes in the market.
He recalled that the Guatemalan migrant intends to return and part of the remittances he sends is for when he returns to the country, which is not the case for Salvadorans and Hondurans.
The authorities refer to the growth of the US economy and labour market. Because the base scenario, far from diminishing, will increase the flow, and when there is a perception that someone can be deported, a larger consignment begins to be sent, and where does this greater flow come from?, of these years of bonanza in the U.S. economy and a labor market where wages increased a lot.
Another aspect is that the migrant does not intend to settle in the U.S. It has accumulated savings, even though the labor market deteriorates (but not the base scenario), they still have savings or reserves to send them.
In the short term, far from seeing a drop in remittances, what we would be watching is an increase. But in a medium-term scenario, it is that it grows in what has historically been between six and seven percent, the economic manager said.
By 2025 the annual growth rate would be between six and seven percent for an amount close to US$22.986 million.
Risk management
On a risk map already in a Trump administration for transfers, the risks are up, for the reasons set out: for savings, a growing economy and labor market with employment demand.
The other point is that the new administration intends to provide fiscal stimulus, expressed through tax cuts and public spending aimed at certain sectors and a U.S. Federal Reserve (Fed). The US, lowering interest rates – which will be a relaxation of monetary policy and adds to a fiscal expansion, therefore, there will be a fire of combustion to fuel this economic growth, which is more activity due to economic policy stimuli.
One conclusion is that, since there is more productive activity in the US. The U.S. is going to require more work, so a scenario in which there is a mass deportation of migrants is not so feasible in the short term.
The new estimates for calculating remittances will be based on future measures on migration.
Pledging
Fernando Spross, associate researcher at the Guatemalan Development Foundation (Fundesa), explained that on this variable a tightening of immigration containment policies would be expected, although it is necessary to see if the elected authorities in the United States are to be seen. U.S., they keep the promises offered in the campaign.
He reiterated that the growth of remittance shipments depends on the functioning and demand of the labor market in the United States, and especially on activities such as construction, services, agriculture and hospital care, in which migrants are concerned.
This article has been translated after appearing in Prensa Libre