Honduras Has the second Most remittances in Latin America

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By LatAm Reports Editor

In gross numbers, Honduras is among the five Latin American countries that received the most money for remittances, but when it represents that figure with GDP, it is the second, after Nicaragua.

This percentage is only below Nicaragua, which in the same year reported $4.668 million in remittances, or 26.9% of GDP, according to the World Economic Outlook of the International Monetary Fund (IMF).

GDP is the monetary value of goods and services produced by an economy (in this case Honduras).

Last year, the country had a GDP of $33.992 million, while Nicaragua reached $17.353 million.

Both nations top the list of countries where remittances represent a high percentage of Gross Domestic Product, not only when compared to others in Central America but also in Latin America.

Edgar Aguilar, researcher on migration issues at the Association for a Fairer Society (ASJ), said these percentages show how remittances in Honduras are already an important part of the economy,

Family remittances rose from 6.1% of GDP in 2000 to 25.3% in 2021. This is an important component of the economy, the issue is when this income is spent on incentivizing productivity and thus creating a snowball of progress that brings more people out of poverty. The challenge is that remittances are not used just for consumption, he suggested.

They cover basic needs

Donña Teresa is completely dependent on the remittances sent to her by her four children from the United States.

They send her money to pay for the light, cable, buy medications, pay for medical consultations, food and anything else she might need.

He has more than 20 years of not seeing them in person, after they decided to emigrate to have better living conditions and it is not easy, he counted in dialogue with EL HERALDO Plus.

Talking about his children brings him tears, but they had their families and they had to get ahead, he said.

Her children don’t help her, so every time she needs something they send her money to cover her needs. Sometimes you receive $500 or $1,000 a month (between 12,34 and 24,693 lempiras), other days more, everything depends on the costs you have to cover, especially when you should go to the doctor.

According to the National Survey of Migration and Remittances in Honduras, conducted by the National Institute of Statistics (INE) and the International Organization for Migration (IOM), one in four households received family remittances in 2022.

The document, published in late 2023, mentions that 454,733 households have a relative who emigrated to another country, which is why Honduras receives the most money from people abroad. In the case of Dona Teresa there are four.

These worrying data, together with the situation in the country, according to analysts, position Honduras as the second in Central America and Latin America more dependent on family remittances (only after Nicaragua) in relation to GDP.

It is even more recurrent that remittances have a high percentage of GDP in Central American nations than in the rest of Latin American countries, according to the IMF World Economy Outlook, analyzed by the EL HERALDO Plus Data Unit.

Reports say that Nicaragua, Honduras, El Salvador and Guatemala, just in that order, reported in 2023 greater dependence on the money that emigrants send to their relatives or relatives to pay their expenses.

Subsequently, Haiti is home, where remittances are equivalent to 16.3 per cent of GDP.

Mexico, for its part, emigrants sent $67 billion in remittances. In percentage terms, and by making a mathematical calculation, we can say that it amounts to 3.7% of GDP.

Costa Rica and Panama, also located in the Central American region, are one of the countries that report the least dependence on family remittances, as do Argentina, Brazil, Uruguay and Chile, all in South America.

There is this strong dependence on our remittance economy and that is a problem because this variable becomes vulnerable, considering that we are swinging from what happens in the U.S. economy, explained Liliana Castillo, former president of the College of Economists of Honduras.

The economics expert said that as unemployment in the United States, one of the countries where Honduran migrants reside, remittances sent to Honduras enter – with less growth. In addition, it is waiting for the anti-immigrant policies implemented by each state, which also generates an impact.

Edgar Aguilar: Family remittances rose from 6.1% of GDP in 2000 to 25.3% in 2021. This is an important component of the economy.

That’s where it’s a problem for our economy, to be dependent only on that variable because of all the foreign exchange income that enters the country or that entered in 2023, remittances accounted for 52% and exports only 22%. The other numbers that come in to a lesser extent from foreign direct investment, some debt contracting, then it is worrying that this issue is sharpening in the future, he said.

Castillo lamented that the emigration of Hondurans stopped after Hurricane Mitch, although he said there was a bigger peak a decade ago and then with the departure of migrant caravans from 2018.

The conditions of inequality have been further exacerbated, the conditions of inequality all social indicators have worsened and since then we see that more people come out and, therefore, more remittances are entering, but the remittance ratio has always remained there about 20% of the Gross Domestic Product in the last decade,” he recalled.

The needs of the population are reflected in the use they give to remittances, according to the INE and IOM, since in the survey they conducted in 2022 they found that 78.1% of the money they received for remittances was used for food, 31.4% for health and 30.1% to pay for basic services.

Aguilar, a specialist in migration issues at ASJ, advised that the government should provide and guarantee quality public services, especially health and education. In this way, funds are released that can be used for productive activities that stimulate economic growth and job creation.

In a series of recommendations, Aguilar suggested that there is a need to stimulate investment and financial services, create incentives to attract diaspora investments, reduce remittance transaction costs, support remittance investment in agricultural expansion and ensure that there are no barriers to women buying land and other real estate.

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Although remittances benefit families and help to boost domestic demand, as a country it makes us dependent on that variable to maintain the Honduran economy, Liliana Castillo said.

Like Castillo, economist Claudio Salgado said that sending remittances generate foreign exchange, but that some households have become completely dependent, to the point that they do not even make good use of money.

If Honduras’ trade balance is deficit, that is, exports minus imports, is negative. This makes it less negative is family remittances, because it is not within exports, but is in what we call the balance of services, he detailed.

The expert said that without the $8.8 billion of family remittances in 2023, our international reserves were falling and that would have led to a strong devaluation and all the consequences of a devaluation, he warned, setting the example of Argentina.

He recalled that remittances support many households to pay for and purchase goods and services.

He stressed that Honduras is among the five Latin American countries that receives the most money for family remittances, since in 2023 it was $8.8 billion.

This figure represents only 13% of the family remittances that Mexico received, as reports say it was $67 billion.

The third country in Latin America and the first in Central America most dependent on remittances (in gross numbers) is Guatemala: it received $19.855 million. Then there is the Dominican Republic and Honduras.

It is beneficial because it is our greatest source of foreign exchange generation, but the other means that in Honduras we are not creating the necessary conditions for citizens to stay. What is happening is that many people blame the government, but I would say that there are other elements that need to be taken into account, which is the economic model that is being followed in the world,” Salgado said.

This article has been translated from the original which first appeared in El Heraldo