Remittances to Latin America and the Caribbean in 2013

During 2013, the total amount of remittances received by Latin America and the Caribbean (LAC) was similar to the previous year, so the annual rate at the regional level barely changed. After the drop in these flows in 2009, resulting from the international financial crisis, remittance flows to LAC recovered slightly in 2010-2011, and then started to stabilize in 2011. In 2013, the inflow of remittances from outside the region reached US$61.251 billion. This total reflects the increase in remittances in Central America and the Caribbean, compensating for the decline in Mexico and South American countries.

Figure 8: Remittances to Latin America and the Caribbean (2001-2013)

Source: MIF-IDB
Note: Data on remittances in 2012 reflect adjustments made to previous estimates for Panama and Costa Rica.

Prior to the international financial crisis, remittance flows into LAC countries had reached average annual growth rates of 17%. However, the 2008-2009 economic crisis provoked a major change in the trends observed until then[1].Remittance levels fell more than 10% in 2009, followed by a modest rise of 6% in 2011 and a levelling off at the regional level. Stabilization of these aggregated flows masks the widely varying tendencies in different countries and subregions, as will be shown below.

The evolution of remittance income received by all LAC countries in 2013 showed sub-yearly variation: levels fell in the first half of the year and grew in the second half. Since remittance flows into LAC countries vary according to the migratory flows and economic conditions of each country's migrants, we will examine the picture in more detail at the subregional level.Therefore, for the purpose of this analysis, the LAC region is divided into four subregions: Mexico, Central America, the Caribbean, and South America.

Figure 9: Remittances to Latin America and the Caribbean (2006-2013) according to destination

Source: MIF-IDB

Almost all remittances received by Mexico are sent from the United States. The 2008-2009 economic crisis in the United States therefore provoked a significant drop in remittances sent to Mexico. Later, there was a brief recovery, with certain seasonal highs and lows associated with shifts in the peso/dollar exchange rate. In 2012, however, especially during the second half of the year, remittance levels declined, a trend that continued during the first seven months of 2013. In the first and second quarters of 2013, remittance levels dropped 10.5% and 9.1%, respectively, while in the third and fourth quarters, the levels grew (2.5% and 3.0%, respectively). This growth was insufficient to reverse the negative growth in the first half of the year, so 2013's overall growth rate was -3.8%.

The levels of remittances flowing into the countries of Central America were the first to show signs of recovery after the international financial crisis. These countries continue to experience higher remittance rates than countries in the other LAC subregions. In 2013, the average annual growth rate for Central America was 5.4%, similar to previous years. Levels in this subregion dropped only 9% in 2009, but later, annual growth rates returned to levels similar to those observed before the crisis, which was also true last year. As such, the levels of remittances sent to these countries in 2013 surpassed even the highest pre-crisis levels. This jump reflects the increase in remittances received in 2013 by countries such as Honduras and Guatemala, which experienced annual growth rates of 7.8% and 6.7%, respectively.

The Caribbean region, after feeling the effects of the crisis, enjoyed an accelerated recovery of remittance flows due to the extraordinary amounts sent to Haiti in response to the 2010 earthquake. In 2012, the total volume of remittances sent to the whole region showed virtually no change. During 2013, this subregion had annual growth of 3%. Of the countries in this subregion, Dominican Republic led the field with an annual increase of 5.5%, while the levels of remittances being sent to the other Caribbean countries included in this study grew only 1.3% to 1.6% during the year.

Figure 10. LAC remittances annual percentage change, 2007-2013

Source: MIF-IDB

Post-crisis recovery of remittance levels has been slow in the countries of South America, which have also presented more varied growth rates than in the other subregions, in part due to the diverse origins of these flows. Remittances sent to this subregion originate in the United States, Europe (mainly Spain), as well as several Asian countries (mainly Japan, in the cases of Brazil and Peru) and countries in the LAC region (for example, remittances from Argentina and Brazil to Bolivia and from Venezuela to Colombia). The severity of the international financial crisis and subsequent degree of recovery in the sending countries (especially the United States and Spain) affect the amount of remittances sent to different South American countries.

Despite this situation, in 2013 the overall general trend in South America was similar to that of Mexico and the Caribbean, presenting drops in the first half of the year and increases in the second half, with a net a (negative) annual growth rate in the subregion of -1.5%, affected primarily by the weakening of remittance flows to Brazil, a trend already observed for several years.

Remittances received by Andean countries also showed a post-crisis recovery. However, due to the difficult economic situation persisting in Spain, the trend has reversed. Still, in 2013, the remittances received in the Andean region showed a slight positive annual increase of 0.4%.

[1] Maldonado, R., Bajuk, N., Hayem, M. “Remittances to Latin America and the Caribbean in 2011: Regaining growth.” Multilateral Investment Fund, Inter-American Development Bank. Washington, D.C., 2012.