Latin America breaks remittance record in 2021, according to World Bank

Remittances to low- and middle-income countries will grow more than expected in 2021 and Latin America and the Caribbean are likely to reach a new record., becoming the region with the highest growth in the world, according to World Bank estimates.

In Latin America, the increase in remittances is expected to be 21.6% by the end of the year, a new high of 126,000 million dollars in 2021, according to the review on migration and development published on Wednesday by the World Bank (WB).

Globally, In 2021, remittances from low- and middle-income countries are estimated to rise 7.3% to $ 589 billion.

It would be the second year in a row that remittance flows to low- and middle-income countries – excluding China – exceed the sum of foreign direct investment and foreign development assistance, which highlights the importance of remittances as livelihood for households to meet their basic needs in times of economic hardship.

“The remittance flows sent by migrants have been a fundamental complement to public cash transfer programs” to help families during the economic crisis caused by the coronavirus pandemic, said Michal Rutkowski, global director of the Department of Global Practices of Social Protection and Work of the World Bank. “Facilitating remittance flows to provide relief from tight household budgets should be a fundamental component of public policies to promote global recovery,” he said.

Behind Latin America, the regions that will receive the most remittances are the Middle East and North Africa, with an increase of 9.7% compared to 2020; South Asia, 8%; Sub-Saharan Africa, 6.2%, and Europe and Central Asia, 5.3%.

In East Asia and the Pacific, remittances decreased by 4%, but if China is excluded, they registered an increase of 1.4%, the WB report said.

The Latin American economy was heavily hit by the pandemic and GDP fell by nearly 7% in 2019 to levels not seen in more than 100 years. Although multilateral organizations project that this year will end with a revival of around 6%, they cut activity in half for next year mainly due to the threat of new coronavirus variants and fears of a re-outbreak.

By 2022, the World Bank expects remittances to increase by 2.6% worldwide and 4.4% in Latin America due to the prospects of lower growth in the United States, the country from which the most remittances are sent to the region.

In Latin America, Mexico was the main recipient of remittances this year: 52.7 billion dollars arrived there, equivalent to 42% of the region’s remittances.

In some countries with smaller economies, the value of remittances represents more than 20% of the Gross Domestic Product. Among them is El Salvador, with 26.2%; Honduras, with 26.6%, and Guatemala, with 18%, said the World Bank.

Among the factors that helped to increase remittances in Central America and Mexico are the adverse effects of the pandemic and hurricanes Grace and Ida, the World Bank said. He also mentioned the recovery of employment and the fiscal and social assistance programs in the countries where the migrants who send the money are, especially in the United States; and the increase in migrants in transit in Mexico and in other countries.