This briefing note offers insights as to whether cryptocurrency is an active form of currency transaction for family remittances to Latin America and the Caribbean. The main findings are:

• In the US-LAC outbound money transfer corridor, there may be 2.4 million potential Latino migrant cryptocurrency users, with a total stock to transfer US$740 million annually.
• The Latin American and Caribbean market points more uncertainty as to the volumes received:
  • There are an estimated 5 million retail users of crypto wallets in the region;
  • This amounts to an estimated stock of $2 billion among them;
  • There is no clarity whether these users have received or performed remittance related transactions.
• Across countries there are differences:
  • In 2023, Venezuela registered potentially 100,000 retail transactions supported by cryptocurrency;
  • El Salvador with Bitcoin as legal tender registered less than US$7 million monthly payments through Chivo wallet or 27,000 monthly transactions.
• Available crypto wallets in the US and LAC markets share similar characteristics regarding their functional use for remittance transfers. Their design is not yet in correspondence with the migrant market. No leading money transfer company handles or accepts cryptocurrency.
• Were Latino migrants with crypto wallets to transfer all their funds for family remittances, their market share participation would be 0.5% of the total market.

The role of cryptocurrency as a source for remittance payments has been highlighted by some as emerging, and others as a potential opportunity. The examples utilized in the news, such as references to Bitso, or use of cryptocurrency in Venezuela or Argentina typically involve general comments on uncertain volumes, or use of validated data. 

The evidence does not yet demonstrate an effective footprint. For the most part, analysis on cryptocurrencies is unclear as it relates to remittances, because most of the information is speculative and not supported by concrete evidence. Generally, analysts are making uninformed references without concrete illustrations beyond the “it is cheaper than the current market” statement.

More importantly, news reporting on cryptocurrency does not reflect clarity between the different segments or categories that apply to cryptocurrency. This briefing reviews Latin American countries that point to this still nascent issue as an environment that is not, yet remittance versed.

Cryptocurrency wallets in the market show the ability to perform crypto transactions into stable coin or US-dollar bank accounts, but their design and marketing does not correspond to the migrant-sending market.

Finally, while this financial vehicle may offer some opportunities, such as low or no cost, due to the very low digital finance capability on the receiving end, few significant locations that may accept crypto transactions or wallet versatility to perform payments at local stores in local currency, create challenges that may become greater than the opportunity.

An Overview of Cryptocurrency

A nascent but growing industry[1], crypto assets can generally be divided into three main subsegments: exchange, payments, and custody. Exchange refers to activities relating to the trade, swap, or brokering of crypto assets; payments refer to the use of crypto assets to complete financial transfers, top-ups, or purchases; while custody refers to security, escrow, or wallet services. Exchange activities constitute the largest segment in LAC, roughly equaling the share of payments and custody segments combined[2].

To offer an analytical perspective about the cryptocurrency market, the starting point consists of determining the appropriate indicator to use as it relates to those three categories of cryptocurrency vis a vis remittance: volume (stock of value, estimated at US$2.3 trillion), annual volume in transaction exchanges (US$80 billion), or users (575 million). The second (exchanges) or the third (users) would be appropriate baseline indicators because they enable the activity for remittance transfers. 

Key facts in assessing the market:

It is important to keep in mind the distinction between market cap (the total stock of cryptocurrencies), cryptocurrency exchanges, users, and the cryptocurrency storing and transfer or exchange vehicles: crypto wallets.

• Global market cap in US$ values of cryptocurrency as of 2024 is US$2.3 trillion—global economic activity is US$108 trillion in 2023.
• Average daily cryptocurrency exchange ranges from US$70 to US$80 billion (3.5% of market cap), pointing to a dynamic and volatile market with fluctuations of more than 5% a day (note, daily global remittance fund transfers are US$3 billion);
• The number of owners of crypto assets is estimated at 575 million physical and institutional entities.
• The number of owners of crypto wallets is 122 million among Bitcoin and Ethereum (71% of all volume). Crypto wallets are the fundamental payment-based vehicle for cryptocurrency transactions for exchange, payment, or custody. Further, this 35% of all value lives in ‘hot wallets’ as opposed to ‘cold’ wallets, the latter of which are not accessed regularly and stay offline.
• Only 10% of these crypto wallet owners are active weekly.
• The number of global retails[3] crypto wallet owners is 117 million (96% of all owners, but 6% of all cryptocurrency value);
• The average value among retail crypto wallet owners US$307;
• Crypto wallet owners in the US are estimated at 22% or 26 million of global users;
• Total estimated value of retail crypto wallet owners is $36 billion, and $8 billion in the US.
• The demographic profile of cryptocurrency users in the US is very different from the average migrant profile:
  • crypto users are younger, 70% are under 40, whereas 60% of migrants are over 40.
  • half of which would be foreign-born Latino migrants (2.9 million).
• At US$307 average stored in crypto wallets, Latino foreign-born wallet stored value in the US would be US$800 million.
• Any remittance transaction would originate from this market segment apart from someone who randomly chose to try using a crypto wallet.
• Typically, 80% of adult migrants send money, which would translate into 2.4 million Latino crypto users who, were they to use their wallets to remit all their funds, would rely on an annual volume of US$740 million (US$2 million a day).
• Currently, the US-LAC number of senders is close to 30 million for an estimated US$300 million transfers a day. An Inter-American Dialogue 2021 survey of Salvadorans thinking of using cryptocurrency pointed to 3%. Yet the actual number is under 1%.

The figures above offer a baseline to understand the extent to which crypto wallet users would or could perform remittance-related transactions in the US, that is, sending crypto currency to relatives in crypto or fiat.

The baseline matters because it offers a method that can be benchmarked to better understand cryptocurrency performance on remittances to Latin America and the Caribbean.

Cryptocurrency in Latin America and the Caribbean and Remittance Transfers

According to Chainalysis[4], 7% of crypto value transactions are in the Latin American and Caribbean region, estimated at US$370 billion between July 2022 and June 2023, resulting in US$1 billion exchanges a day.

Less than 5% of these assets are retail transactions under US$10,000, or an annual average of US$2 billion, which would represent less than 5 million retail users across the region. Retail crypto users may be exchanging US$5 million a day at most—compared to US$400 million a day in remittance transfers. 

In addition, more than half of these transactions are performed in stablecoin. Argentina, Brazil, Mexico, and Venezuela captured 75% of these transactions.

It is uncertain what percent of these transactions and users originated or interacted from a transaction that was a family remittance or what percent of these users receives remittances. However, the figure alone offers an idea of the scope and depth of the market compared to 50 million remittance recipients.

Moreover, the information available regarding crypto transfers as remitting is largely anecdotal and unsupported by evidence.

In the following section, we review El Salvador, Venezuela, and Mexico as cases where the media has associated remittances with cryptocurrencies. 

The section also shows a review of popular cryptocurrency wallets and their remittance functionality.

Chivo Wallet in El Salvador: Highly Underperforming

In 2021, El Salvador’s government introduced Bitcoin, including a subsidy to motivate users to adopt Chivo Wallet, and issued a cryptocurrency wallet. Overall, we find that senders still prefer the existing money transfer operators to send money.

In an Inter-American Dialogue survey to Salvadorans in the US in September 2021, 61% of survey respondents were aware of Bitcoin, but only 20% had used it. Further, 7% had tried sending remittances in Bitcoin, but the experience was negative for 100% of the respondents; only 4% of the sample were aware of a company that offers remittances using Bitcoin. More importantly, 13% of Salvadorans would like to have a different option to send remittances, preferably a direct deposit, and less than 3% considered Bitcoin as an option.

These responses coincide with Central bank data from El Salvador, including the use of the crypto wallet, Chivo Wallet, and still shows slow use of Bitcoin and Chivo Wallet for money transfers. In Q4 of 2021, when the currency and wallet went into effect, El Salvador received US$57 million in Chivo wallet transactions (not all of which were Bitcoin-based), and since then, volumes have lowered by half. As of April 2024, the accumulated volume transferred via the digital wallet was US$28.8 million or US$7 million a month, equal to 27,000 transactions a month (out of 2.2 million monthly transfers). 

TABLE 1: Remittances to El Salvador (volume for January-April)

Source: Central Bank of El Salvador

Venezuela and Crypto: A Half and Half Story

The conversation around using cryptocurrency in Venezuela to remit reflects anecdotal references of digital nomads temporarily transacting with crypto, or average Venezuelans receiving funds via crypto wallets. The topic has gained notoriety as Venezuela’s political crisis explodes into a major currency devaluation, resulting from Maduro’s economic mismanagement that led to a dramatic slide of the national currency.

To note, access to data on transfers of remittances to Venezuela is scant. 

The Inter-American Dialogue’s, however, demonstrated that less than half of Venezuelans remitted to families since 2019, and the large majority used informal mechanisms, such as sending through travelers or bartering dollars for local currency in third party bank accounts. Little evidence has existed on actual transfers, and money transfer companies try not to operate in the country, due to sanctions related risks or currency instability. 

Chainalysis showed that during the year period studied (July 2022-June 2023), crypto transactions in Venezuela amounted to US$25 billion, which, if broken down during the two years, was 20% of the country’s GDP in 2022. The report quoted political activists who said that the platform was used as a way to support humanitarian relief to many people in 2019. AirTM did provide support to over 60,000 owners of e-wallets for a total of US$5 per person, though a handful got to use the currency. Moreover, according to Ecoanalitica, 1.2% of payments in Venezuela are performed via cryptocurrency, meaning that the volume exchanged or transferred, as reported by Chainalysis, was rather institutional than retail in nature.

In 2024, several retail chains in Venezuela that accepted cryptocurrency in prior years now no longer accept it. In addition, Bloomberg reported that Chainalysis estimated that 9% (US$461 million) of t Dialogue’s calculated remittance volume in 2023 were cryptocurrency transfers—or equivalent to 2% of the volume or 125,000 transactions. It is hard to ascertain the extent of that volume, but Chainalysis calculated the figure by looking at retail wallet owners performing less than US$1,000 transactions. 

Notably, the use of cryptocurrency has been a questionable issue when it comes to the Maduro government. Maduro created the Petro, a cryptocurrency backed by oil and gold reserves, in 2017, but it was discontinued years later. In 2023, because of a corruption case of siphoning between 3 and 20 billion dollars through cryptocurrency, led by Superintendencia Nacional de Criptoactivos (SUNACRIP), the agency in charge of overseeing cryptocurrency went under criminal investigation. The allegation is that pro-Maduro loyalists, like Tareck El Aissami, who was in charge of Petróleos de Venezuela, S.A. (PDVSA), were allegedly using cryptos like USDt to carry out oil sales around the world.

In conclusion, the use of cryptocurrency in Venezuela is a reality more evident than elsewhere in the region and a popularly known payment system between institutional and retail players.

Mexico and Cuba are other cases where references are made to the penetration of cryptocurrencies for remittance transfers. In the case of Mexico, Bitso executives mentioned in an interview that they had performed US$4.3 billion transactions in remittances in 2023 as part of their back processing support to fintech like PayBrokers, Félix Pago and Briq.mx. Bitso Business basically provides their blockchain technology to process payments for these businesses.

The Cryptocurrency Intermediation Market

For remitters to send and have relatives receive cryptocurrency, most of which is in the form of stablecoin, access to cryptocurrency transfers or a cryptocurrency wallet is the first step. The market for wallets runs in the thousands and is very widespread. 

For this briefing, the Dialogue reviewed more than 10 crypto wallets were reviewed in terms of their registration process, purpose, functionality, fee structure, and other features—like currency exchange information.

The main finding is that there are two sets of companies, those offering the almost exclusive purpose of operating cryptocurrencies for mostly exchange and custody services. And those that offer versatile payment mechanisms from of a larger pool of FinTech.

TABLE 2: Crypto Wallets: Purpose and Functionality

Source: Author’s elaboration

The table above offered some basics about the various wallets available.

The main advantage for migrants of these types of cryptocurrency wallets is that pricing is typically zero. The drawback is substantive:

• Most wallets operate in a limited financial transaction environment disconnected from payment networks through retailers.
• Digital financial access among the average person, even remittance recipient is very low: for Central Americans between 10 to 3% of adults own a digital wallet—those receiving remittances for more than five years are more likely to use it. Mexico and Colombia the percentage is between 30 and 40% respectively.
• Money laundering compliance becomes an issue for cryptocurrency transactions, and the mix may increase risk assessments among banking institutions.
• Migrants lack sufficient disposable income to consider crypto as an investment and may find it complicated to navigate and obtain more than one currency to conduct payments.
• The target population in the cryptocurrency business typically is marketing to male, professional, and high-income individuals, which contrasts with the migrant profile. The features and design architecture of the wallets, with few exceptions, like OSMO or Blaze, are not fully ‘tropicalized’ to a migrant’s interest and needs.
• Remittance companies’ reluctance to integrate cryptocurrency deters consumers from learning how to navigate this environment.
• The availability of cryptocurrency exchanges and services, such as ATMS, may be limited for migrants in terms of access and financial feasibility.

Key Takeaways

When it comes to the extent to which crypto currency or crypto wallets are used for family remittances, the evidence does not yet demonstrate an effective footprint. For the most part, reports on cryptocurrencies are unclear as it relates to remittances, because most of the information is speculative and not supported by concrete evidence.

More importantly, the baseline for payments in cryptocurrency from the US-LAC corridor seems to be at most US$700 million. In the Latin American remittance context, it would mean 0.6% market share.

Cryptocurrency wallets in the market show the capacity to perform crypto transactions into stable coin or US-dollar bank accounts, and were their design and marketing better correspond to the migrant-sending market, users would entertain accessing them.

Key Terms

Cryptocurrency

• Cryptoasset
• Mining
• Blockchain
• Stablecoins
• Centralized finance (CeFi)
• Decentralized finance (DeFi)
• CBDCs – Central Bank Digital Currency
• P2P
• Total value locked (TVL)
• Smart contracts
• AML/CFT
• KYC regulations

[1] https://www.statista.com/outlook/fmo/digital-assets/cryptocurrencies/worldwide?currency=usd

[2] https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/crypotasset-ecosystem-in-latin-america-and-the-caribbean/

[3] Retail owners are categorized as those with stocks and transactions under US$10,000. Average value for those users who owns wallets since 2020 is $400 and for those before 2020 is $200, with an average of US$307. Other owners are institutional or legally established entities like businesses.

[4] CHAINALYSIS. Latin America: Venezuela and Argentina Stand Out as Examples of Crypto’s Unique Utility. OCTOBER 11, 2023.

The post Assessing Cryptocurrency in Remittances to Latin America and the Caribbean appeared first on The Dialogue.

Today, migration continues to be a social, political, and economic reality across the world – perhaps more intensely than before. As a result, migrants working in Dubai, Rome, and Los Angeles, among other cities, are sending record amounts of money home to their friends, families, and other loved ones. In 2023, roughly US$857 billion were sent in remittances across the globe[1] of which approximately US$160 billion went to Latin America and the Caribbean (LAC). Amounting to five percent of the region’s gross domestic product (GDP), these flows represent an economic lifeline to a region contending with state fragility, emigration, and global economic crises. In addition to exploring the migration patterns driving these flows, this note explores in detail the scale, composition, and nature of remittances.

FIGURE 1: REMITTANCE GROWTH IN LAC, 2001-2024

Source: Central Bank data

Migration Patterns Driving Growth

Last year, migration from LAC to the United States grew more than six percent from 36.9 million to over 45.3 million migrants living in the US. The US remains the destination for one out of five migrants worldwide[2] and, as a result, more migrants are being encountered across the country than at any other time in recent history. 

The US will receive at least three million people by the end of this year, and border encounters as a share of the US population are expected to remain above 0.7 percent for the fourth straight year. For context, in the decade before the Covid-19 pandemic, this number hovered around 0.1-0.2 percent.

FIGURE 2: BORDER ENCOUNTERS AS A SHARE OF THE US POPULATION, 1991-2024

Source: Department of Homeland Security (DHS) National Encounters

Recent growth among migrants from LAC has come largely from fragile states experiencing social, political, or economic crises. These countries include Cuba, Haiti, Nicaragua, Venezuela, Guatemala, and Honduras. Following the heights reached by these countries post-pandemic, there has been a downward trend in encounters in the short-term.

Factors determining whether or not a person decides to migrate are complex and are the result of a mix of reasons. Among these are climatic, economic, social, aspirational, transnational, and political considerations. According to survey data in Northern Triangle countries and Nicaragua – which together represent an estimated 15 percent of all migration from LAC – the intention to migrate has reduced, roughly mirroring pre-pandemic levels.

FIGURE 3: US NATIONWIDE ENCOUNTERS, 2019-2024

Source: Department of Homeland Security (DHS) National Encounters

FIGURE 4: INTENTION TO MIGRATE IN CENTRAL AMERICA, 2019-2024

Source: Survey data collected by author.

While migration appears to be showing signs of slowing[3], migration to the US is continuing at record levels and will continue to positively impact remittance volumes sent back to the region. As a result, the US will remain the top remitting country to LAC for the foreseeable future. Over 80 percent of remittances sent to the region originate in the US, while 17 percent come from Europe and the rest of the world, and three percent are intraregional remittances.

Current Remittance Trends

Future flows of remittances for the next five years will likely show similar characteristics albeit at a slower pace. The following sections explore current remittance trends from 2023 and 2024 in order to draw conclusions regarding estimates for the future. In general, the scale, composition, and nature of remittances in LAC have all changed since 2020.

Scale

As aforementioned, remittances to LAC have grown by over nine percent from US$146 billion in 2022 to US$160 billion in 2023. Last year, the top 10 remittance receiving countries received US$142 billion growing by over eight percent in 2023. Based on trends so far this year, these countries will see 5.5 percent growth totaling an estimated US$150 billion received in 2024.

Lastly, remittances volumes for all countries to the region are estimated to increase 5.1 percent in 2024 to US$168 billion.

At the country level, the highest year over year (YoY) growth rates seen in 2023 were in Nicaragua (51 percent), Cuba (33 percent), and Argentina (18 percent). In general, since 2020, the highest YoY growth rates have been seen in countries experiencing political crises or other forms of political conflict. This pattern is illustrated in the table below with the clear exception of Haiti, where remittances have only grown one percent between 2020 and 2023.

TABLE 1: REMITTANCE VOLUME GROWTH LEVELS, 2001-2023

Source: Central Bank data.

Composition

Total transactions in the region are estimated to surpass 45 million within the next five years, up from 41.4 million in 2023. These transactions are largely initiated from the United States by migrant workers sending payments home. Seventy-three percent of person to person (P2P) are estimated to be taking place from the US, 18 percent are from Europe and the rest of the world, while nine percent are intraregional transactions. A smaller, but noteworthy amount of transactions is attributable to business to business (B2B) and person to business (P2B) transfers.

The monthly average principal for nearly every one of the top 10 remittances receiving countries has increased significantly since 2020. This is partly due to global inflationary trends as well as increases in remittance frequency. In other words, migrants are remitting more money, more often, remitting two to three times more a year in 2024 than they did in 2020. Annually, migrants are sending home roughly US$4,076 in annual principal. This principal is larger if the sender is sending from the United States (US$4,463) than senders in LAC (US$843) or elsewhere (US$3,968).

Last year’s global market share distribution found 12 percent of remittances were serviced by Western Union, followed by Remitly (four percent), Intermex, MoneyGram, and Ria (three percent) and Viamericas (1.5 percent). In addition, digital remittance transactions to LAC are steadily increasing and are projected to reach over 45 percent of total transactions by 2030. Of the total digital market (36 percent), Remitly captures the most at 19 percent, Western Union captures six percent, while MoneyGram and Ria (Euronet) together capture three percent. Other companies together capture roughly eight percent (five percent coming from Paypal’s ‘Xoom’). Adoption of digital remittance services has been assisted by improvements in mobile payments technology and systems as well as the increased digitization of the economy at large. However, migrants still largely use conventional, in-person remittance methods.

While preference, trustworthiness, and convenience color the debate on digital transfers among RSPs, over 62 percent of senders are still choosing to use in-person methods. While regional payment system innovations like cryptocurrencies or Central Bank Digital Currencies (CBDCs) promise to expand digital options for migrants sending remittances back home, their success will depend on various factors such as successful “off-ramps” for currency use as well as the purchasing power and wealth diversification capacity of migrants.

FIGURE 5: DIGITAL REMITTANCE MARKET IN LAC, 2016-2032

Source: Author estimates based on remittance service provider (RSP) data.

Nature

In 2024, remittances continue to grow as a function of migration. This is more visible in the relationship between border encounters from eight nationalities (Colombia, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, and Nicaragua) that capture over 80 percent of the flows to LAC. This growth can be best seen in Nicaragua and Haiti where remittances increased as a result of the worsening of their political crises in both countries since 2021.

FIGURE 6: BORDER ARRIVALS AND REMITTANCE TRANSFER VOLUME, 2019-2024

Source: Central Bank and DHS. Log values are utilized to control for country differences in volume and border arrivals.

In the near future, remittance growth will resemble periods before the Covid-19 pandemic, as the demographic factors driving post-pandemic growth are no longer present. For example, once a migrant population reaches roughly 17-20 percent of the origin countries’ population, emigration and remittances tend to decrease. Emigration decreases because more socioeconomic pressures are placed on mobility-prone populations and there is more pressure to stay put. As a result of this decrease in migration, changes in remittance growth tend to follow. After the diaspora reaches 20 percent, for each one percent increase in migration, there is 2.7 percent less emigration.

FIGURE 7: MIGRANTS AS A SHARE OF POPULATION AND ANNUAL MIGRATION GROWTH

Source: UNDESA

Nonetheless, growth is continuing as a result of migration. For example, within the Central American migrant community, over 70 percent of this population sends remittances home. As a result, any increase in the migrant population necessarily yields new senders who expand the pool of those already sending money back home. The number of senders is likely to diminish due to a combination of factors, including enforcement actions and demographic growth.

Migration, however, is not the only factor that affects remittance volumes. The economy in the US or other host country affects the principal sent as well. While unemployment rates have remained historically low and the post-pandemic economy in the US has been characterized by a labor shortage (a pull factor for migration), monetary tightening by the Federal Reserve System may have effects on employment in the short term. Therefore, average remittance sending will remain below three percent per year due to an expected rise in unemployment and post-pandemic cost of living increases.

Future Flows of Remittances

By the end of 2024, the LAC region will see remittance growth rates of not more than six percent.

The top 10 remitting countries, for their part, will see more muted growth at five percent. According to our projections, Peru (14 percent), Nicaragua, and Haiti (both 13 percent) will see some of the highest YoY growth rates, Colombia, Ecuador (both 10 percent), and Guatemala (nine percent) will continue to show strong growth, while other countries measured will show growth either on par with, or below, the region.

As discussed above, increases in remittances will continue to be influenced by migration largely to the US. The intention to migrate is a strong sentiment and is reflected in aspirational issues of modern society. Regardless of policy interventions relating to migration, people will continue to find ways to migrate. Specifically, in Central America, growth will stand at five percent annually for the next three years and represents a return to pre-pandemic levels. Negative economic factors will also continue to blunt remittance volumes sent in the years ahead as migrants face down the macroeconomics of inflation in the US.

TABLE 2: LAC REMITTANCE VOLUMES, 2021-2024

Source: Central Bank data

FIGURE 8: ANNUAL MIGRATION FROM CENTRAL AMERICA, 2018-2027

Source: DHS Statistics

For more detailed information, additional data, and analysis please consult the following presentation

Endnotes

[1] “Migration and Development Brief 40 – Remittances Slowed in 2023, Expected to Grow Faster in 2024.” World Bank Group and KNOMAD. June 2024. https://knomad.org/publication/migration-and-development-brief-40

[2] UNDESA, 2025 projections based on entry to the US

[3] Orozco, Manuel and Patrick Springer. “An Unprecedented Migration Crisis: Characterizing and Analyzing its Depth” Inter-American Dialogue. November 28, 2023. https://www.thedialogue.org/analysis/an-unprecedented-migration-crisis-characterizing-and-analyzing-its-depth/

This briefing, and accompanying presentation, are products of the Remittance Industry Observatory (RIO) at the Inter-American Dialogue.

The post Family Remittances in 2024: Looking Ahead amid Possible Shifts in Flows appeared first on The Dialogue.

In the current context, remittance volume will continue and play a central role in US-Mexico relations. As was the case in 2023, remittance growth this year can be attributed to simultaneous increases in migration to the US, transfer frequency, number of senders, and the annual principal amount. Based on available data and current trends, remittance volume will grow by approximately three percent in 2024. This growth rate is lower than rates forecasted for the top 10 recipient countries in Latin America and the Caribbean (LAC).

The following briefing offers an update on remittance growth in Mexico for 2024 by looking at past trends as well as key issues. Additionally, the memo shows how government policy has sought to intervene at the point of sending or receiving in certain ways, and that the overall upward trend is sustained by migration and remittance frequency. Lastly, the memo signals a slowdown in principal sent that is partly associated with microeconomic inflationary trends.

FIGURE 1: FAMILY REMITTANCES TO MEXICO, 2001-2024

Source: Banco de México

Remittances: A Contextual Analysis by Country

Mexico

Remittances have been a focus of attention of several presidents and leaders in Mexico since its democratic transition. During his administration, President Vicente Fox referred to Mexican migrants as the VIP (Very Important Paisanos). Under President Andrés Manuel López Obrador (AMLO) there has been a shift in thinking since 2016. AMLO had first lamented Mexico’s reliance on remittances, then applauded the increased volumes sent, specifically during the COVID-19 pandemic, and has since recognized the significant role remittances play in “reactivating” the Mexican economy. AMLO has made remittances a part of his economic strategy in the past few years and has thanked migrants’ role in supporting their families back home. Over the course of his administration, remittances as a percent of Mexico’s gross domestic product have increased from 2.8 percent in 2019 to 4.2 percent in 2023.

FIGURE 2: REMITTANCES TO MEXICO, 2001-2023

Source: Banco de México and Word Bank Data

FIGURE 3: MEXICO’S GDP AND GDP PER CAPITA GROWTH (%), 2001-2023

Source: Word Bank Data

Similarly, public policies on remittances have been on the radar of different governments, from the creation in the early 2000s of the Banco del Ahorro Nacional y Servicios Financieros (Bansefi) and the Red de la Gente program, to its reincarnation under the AMLO administration – “Financiera para el Bienestar” (FINABIEN) – which includes a remittance service transfer product on a debit card that aims to provide greater access to remittances at a lower cost – particularly in rural areas. The debit card has processed 25,000 transfers, moving US$10 million, and has distributed cards to more than 76,000 holders in the US, and 205,000 in Mexico. A drop in the bucket when compared to the total transfers to Mexico in 2023, President-Elect Claudia Sheinbaum has promised to continue and expand FINABIEN, encourage greater financial inclusion, and regularize and protect migrant workers residing in the US. Yet, Mexican migrants still largely trust the prevailing remittance intermediation market when selecting a sending method.

United States

In the United States, policy discussions surrounding remittances have occurred within the context of various debates, whether it is immigration issues or illicit fund transfers. More recently, it has taken place against the backdrop of a polarizing national discussion on immigration. In this environment, some politicians have sought to introduce blanket fees and taxes on remittance flows – a percentage of which, they claim, is directed toward the finances of transnational criminal organizations (TCOs). In 2009, Oklahoma’s HB 2250, quickly became the legislative mold for state and national legislatures seeking to implement similar measures. The bill introduced a flat fee for all remittances under US$500 alongside a one percent fee for amounts greater than US$500. While this bill became law, similar measures have found little to no traction in other states. Yet, as can be seen in Table 1, proposals have attempted to introduce increasingly higher flat taxes on remittances – reaching 10 percent in recent years.

At the national level, in 2016, President Trump floated the idea that remittance flows to Mexico could be withheld and used to fund his plan for a border wall. During his administration, the idea quickly fizzled out despite the introduction of the Border Wall Funding Act of 2017 which called for a two percent remittance tax. The idea of employing a remittance tax to fund the wall remained dormant until Governor Ron DeSantis (R-FL) revived the idea during his 2024 presidential bid. Since then, there have been several proposals initiated at the state level and one at the national level. In December 2023, Rep. Hern (R-OK) with Sen. JD Vance (R-OH) – currently Pres. Trump’s 2024 running mate – introduced the Withholding Illegal Revenue Entering Drug Markets (WIRED) Act in both the House of Representatives and the Senate. The bill seeks to introduce a 10 percent flat tax for remittances nationwide.

According to data from the Central Bank of Mexico, over 96 percent of remittances entering Mexico come from the US. With remittance dependence relatively high when compared to the past two decades, any tax placed on remittances will negatively affect the Mexican economy in an outsized manner.

TABLE 1: REMITTANCE FEE/TAX PROPOSALS IN THE US, 2009-2024

Source: Bills accessed via corresponding State/National Legislature, “Result of Proposal” determined via State/National Legislature status

Meanwhile, since taking office, the Biden administration’s Treasury Department has increasingly engaged with Mexico’s Ministry of Finance and Public Credit on issues relating to money transfers within the context of concerns related to illicit fentanyl trade originating in China. Conversations[1] have centered on increasing information sharing on such items as investment screening, illicit finance tied to fentanyl, indicators of financial crime, and anti-money laundering/countering the financing of terrorism (AML/CFT) efforts. As a result of these conversations, the two countries announced their intent to form a Bilateral Working Group on Foreign Investment Review. Although primarily intended to facilitate investment screening, both Secretary Janet Yellen and Minister Ramírez de la O have recognized that this forum presents an opportunity to discuss reducing the costs of remittances and have discussed improving payments system connectivity.

Migration Patterns from Mexico

Since 2019, increasing migration from Mexico to the US has been growing the pool of senders who are remitting. Over these past five years, the number of migrants from Mexico living in the US has grown 18 percent from 11.5 million to 13.6 million people. Increases have come in the form of both irregular entries and authorized migration – both of which have grown substantially since 2019.

Migration, both authorized and irregular, combine to expand the pool of senders. For example, last year, each category of migration (See Table 2) either met or surpassed pre-pandemic numbers. As a result, these increases have led to a nearly 34 percent increase in new remittance senders from 2019 to 2023.

Also expanding the pool of senders is an increased retention rate of Mexican migrants in the US. In 2010, the average time spent by Mexicans in the US was only 12 years. This grew to 19 years in 2019, 22 years in 2023, and is estimated to grow to 23 years in 2024. Evidence of this, the share of Mexicans who have spent more than 20 years in the US has grown from 30 percent in 2010 to an estimated 49 percent in 2024. Each year since 2018, two percent of migrants in the US stayed at least a year longer than the usual length of stay which has increased the lot of remittance senders by at least 20,000 people annually.

FIGURE 5: MEXICAN MIGRATION, 1997-2023

Source: Department of Homeland Security (DHS)

TABLE 2: MIGRATION FROM MEXICO TO THE UNITED STATES, 2010-2024

Source: Author estimates, based off of DHS data.

Trends in Sender Behavior

Beyond an increased pool of senders in the United States, remittance volumes have also grown due to increased remittance frequencies and an increase in the annual principal. Since 2019, the total number of senders has grown from 8.9 million to over 10.2 million in 2023 – an increase of nearly 19 percent that has come largely from migration.

In addition to a greater number of senders, these senders are remitting more frequently than in previous years. Outpacing the growth in senders, the number of transactions has grown by over 23 percent. This suggests that senders are remitting more frequently. In prior decades, the average sender remitted between 12 and 14 times annually[2], in 2023 this has grown to over 15 times a year.

TABLE 3: SENDERS AND TRANSACTIONS OF MONEY TRANSFERRED TO MEXICO

Source: Author estimates completed in July 2024.

Moreover, Mexican migrants in the US are sending more on average per transaction. Over the past five years, the average principal sent has seen average monthly year-over-year increases of six percent. Most of these increases occurred during the Covid-19 pandemic (See Figure 6). Increases have since slowed in 2023 and the first half of 2024. The most recent average monthly principal sent (according to remittance company data) is US$487 per transaction.

When considering the overall increase in remittance volume sent to Mexico from the US, it is important to consider that this growth in principal has outpaced migration, specifically during the pandemic years. The change in principal has been more closely associated with US inflation rates than with Mexican inflation rates (See Figures 7 and 8).

FIGURE 6: AVERAGE PRINCIPAL SENT PER TRANSACTION (US$), 2019-2024

Source: Money transfer operator (MTO) proprietary data

FIGURE 7: US CONSUMER PRICE INDEX AND PRINCIPAL REMITTED, 2019-2024

Source: US Bureau of Labor Statistics

FIGURE 8: MEXICAN CONSUMER PRICE INDEX AND PRINCIPAL REMITTED (US$), 2019-2024

Source: Inflation Portal, Banco de México

Remittance Estimates for 2024

This year will also see remittances continuing to reach new heights. The Migration, Remittances & Development Program estimates a maximum three percent increase in volume sent and that growth in new senders will continue to come from authorized as well as irregular migration, both of which are expected to increase in 2024. Despite signs pointing toward growth, YoY remittance growth rates have slowed since November 2021 and decreased for the first time this year (March) since April 2020. This confirms the Program’s assessment last year that remittances to Mexico will not continue to increase at rapid rates seen during the pandemic but will nonetheless steadily increase in 2024.

Growth, however, is unlikely to continue to come from principal sent as this has remained stable over the past two years. Therefore, continued growth in remittances will depend on steady inflows of migrants from Mexico, increased or steady payment frequencies by Mexican workers in the US, and increased or steady principal amounts sent home. Long-term, these factors will require continuous emigration from Mexico, constructive US-Mexico relations on issues related to migration and remittances, and macroeconomic health in the US.

TABLE 4: MIGRATION FROM MEXICO TO THE UNITED STATES, 2024 ESTIMATES

Source: Author estimates, based off data from DHS data and US Department of State immigration statistics.

FIGURE 9: MEXICAN REMITTANCES AND YOY GROWTH, 2018-2024

Source: Banco de México

Three Caveats

The estimates arrived upon in this piece should be considered alongside three other factors. First, seasonal migration is a revolving door and therefore some of those migrants will leave within two years. The annual net number of migrants is not calculated here.

Second, not all transactions are family to family transfers (P2P), nor do they all originate in the United States. Previous work suggests that one tenth of all transactions are business to business (B2B) or person to business (P2B) transfers.[3] Also, four percent of remittances to Mexico originate from countries other than the US.

Finally, it is also important to explore differences in principal and frequency remitted by agent based (or offline) transactions and internet based (or online or digital) transactions. Data from previous surveys suggest that migrants send 10 percent more when using digital transactions than when using agent-based transactions. These increases matter because digital based remittance transfers are over 40 percent of the originated flows and therefore may be influencing the flows as much as overall increases in the principal and migration.[4]

Endnotes

[1] Since June 2023, US-Mexico cooperation to prevent illicit finance has increased with key meetings taking place on: June 21, 2023; December 7, 2023; February 8/February 9, 2024; and April 16, 2024.

[2] Orozco, Manuel & Julia Yansura. 2017. On the Cusp of change. Migrant’s Use of the Internet for Remittance Transfer; Orozco, Manuel. 2021. A Commitment to Family: Remittances and the Covid-19 Pandemic.

[3] Orozco, Manuel. Workers Remittances. Lynne Reiner. 2013.

[4] Orozco, Manuel. Family Remittances Growth in 2021: Between Migration and Transaction Growth; 2022

The post Sending Money to Mexico: Slowed Growth in 2024 appeared first on The Dialogue.

El informe partió de la premisa que el desarrollo con equidad y en democracia requiere que todos y cada uno de los niños latinoamericanos reciban una educación de calidad. Reconociendo que los países de la región habían hecho importantes avances en extender la cobertura de los servicios educativos asignando recursos financieros crecientes, el informe partía de un dato básico que por conocido no deja de ser altamente relevante: los bajos niveles de aprendizaje que caracterizan a los sistemas educativos de la región. En palabras del informe, “Los resultados de pruebas nacionales e internacionales demuestran que América Latina se está quedando atrás, no solo con el resto del mundo, sino con respecto a nuestros propios estándares”. El informe argumentaba que “En una era de creciente globalización y cambio tecnológico acelerado, las brechas educativas representan un desafío vital para las economías y sociedades de la región”.

El informe identificó seis áreas fundamentales para la transformación educativa: la educación temprana, la excelencia docente, el apropiado uso de tecnologías, sistemas de evaluación adecuados, la adaptación de la educación para hacerla relevante a las cambiantes demandas del mundo laboral y sociedades modernas, y el financiamiento sustentable. Reconociendo la complejidad de esta agenda de reforma que requiere de recursos humanos y financieros, compromiso político y persistencia en el tiempo, la Comisión hizo un llamado a pactos sociales por la educación de calidad, que transparenten los objetivos de las reformas, fijen metas y recursos, y establezcan mecanismos de responsabilidad mutua.

¿Siguen siendo válidos el análisis y las recomendaciones de la Comisión? ¿Es el reto de la educación fundamentalmente distinto o podemos, todavía, tomar como guía el informe de referencia a la hora de discutir sobre educación ya avanzada la tercera década del Siglo XXI?

Esa reflexión debe, inevitablemente, incluir el fenómeno de la pandemia del COVID-19 que tuvo un efecto extremadamente alto (y probablemente duradero) sobre el sector educativo. América Latina es la región del mundo que ha reportado más días sin clases presenciales por el COVID-19. Entre 2020 y 2021, la región mantuvo cerradas las escuelas por 158 días en promedio, mientras que el promedio a nivel global fue de 95 días. De acuerdo al Banco Mundial,² más de 2 de cada 3 estudiantes del primer ciclo de secundaria podrían caer por debajo del nivel mínimo de rendimiento. En promedio se podría haber perdido el equivalente de un año y medio de escolaridad en términos de aprendizaje. Los puntajes de primaria en lectura podrían caer a niveles de hace más de 10 años, y 4 de cada 5 estudiantes no podrán comprender un texto de longitud moderada. Existe también evidencia de aumentos en la tasa de abandono y en la salud socioemocional de los alumnos. 

En resumen, la pandemia del COVID-19 profundizó las debilidades que ya experimentaban los sistemas educativos de la región e hizo aún más crítica la necesidad de emprender esfuerzos de mejora en la calidad educativa. Al mismo tiempo, la pandemia generó un experimento a escala que mostró las oportunidades de modelos de enseñanza menos rígidos en los que docentes innovan y alumnos trabajan de manera más independiente y menos reglada. 

El otro fenómeno que debemos considerar y que tiene gran importancia son los crecientes flujos migratorios y la crisis que eso ha conllevado para muchísimas familias, niños y comunidades en prácticamente toda la región. A fines de 2021, UNICEF estimaba que en 2022 el número de niños, niñas y adolescentes migrantes en América Latina y el Caribe podría alcanzar la cifra de 3,5 millones. Esta cifra, que incluye tanto a los niños, niñas y adolescentes migrantes como a los que viven en comunidades de acogida, representa un aumento del 47 por ciento en comparación con 2021. Solo en el caso de la migración a través de la selva del Darién (que se extiende entre Colombia y Panamá), el número de niños, niñas y adolescentes que cruzaron la selva en 2021 es cinco veces más de la suma de los cuatro años anteriores.³ Garantizar el acceso a una educación de calidad para este número creciente de niños migrantes (que en muchos casos han sufrido diversas formas de exclusión y hasta abuso) representa un desafío adicional para muchos sistemas educativos que ya experimentan dificultades operativas.

En este contexto general poco conducente a la muy necesaria mejora de la calidad educativa, podemos ver un variado cuadro de situación con respecto a las seis áreas de énfasis consideradas por la Comisión. En años recientes, hemos visto pocos avances en la muy crítica área de las políticas docentes. La nueva ley de carrera docente en Chile (que entró en vigor en 2017) que introdujo cambios significativos orientados al desarrollo profesional docente es más la excepción que la regla a nivel regional. En contraste, la experiencia de México apunta en la dirección contraria con cambios que debilitan los procesos meritocráticos como instrumentos para promover la excelencia docente.

La falta de progreso en términos de políticas públicas contrasta con el creciente énfasis que recibe la profesión docente por parte de la sociedad civil organizada. Iniciativas de carácter nacional (como Elige Educar en Chile o Profissão Docente en Brasil) o regional (como la Coalición Latinoamericana para la Excelencia Docente) son ilustrativas de esta tendencia y sugieren el potencial que tienen.

A pesar de algunas innovaciones aisladas en cuanto a metodologías y objetos de evaluación⁴, los sistemas de evaluación han seguido operando en gran medida de manera inercial sin notables innovaciones ya sea en la implementación de pruebas oficiales o en su uso para el diseño de estrategias orientadas a mejorar el aprendizaje. Durante la pandemia hubo una tendencia a suspender las evaluaciones, pero estas retornaron a su normal ejecución posteriormente (Herrero-Tejada et al. 2022). Nuevamente México, con la reforma constitucional que extinguió al Instituto Nacional para la Evaluación de la Educación (INEE) representa un retroceso en el movimiento hacia el fortalecimiento de las instituciones de evaluación que caracterizó las primeras décadas y media del siglo (Ferrer y Fiszbein, 2015).

Un aspecto auspicioso que podemos observar en los últimos años es el creciente reconocimiento de la importancia que tiene la educación temprana como parte de una estrategia de largo plazo para mejorar la calidad educativa. La evidencia científica ha sido clara ya desde hace bastante tiempo: las bases para el pleno desarrollo cognitivo y socioemocional se sientan en los primeros años de vida y, por lo tanto, las inversiones en educación temprana tienen un muy alto retorno. Casi todos los países han desarrollado en estos últimos 15 años una política integral de primera infancia, estrategias, o un plan nacional de infancia. Esto denota el reconocimiento de los gobiernos de la región a este grupo etario y su relevancia para el desarrollo humano. Como principales desafíos pendientes se observa la necesidad de mayor y mejor articulación intersectorial que pueda entregar una oferta integrada de prestaciones. Está en muchos países pendiente la institucionalización del plan, estrategia o política con un liderazgo claro y con poder político. Por último, hace falta una mayor claridad en la inversión en este grupo etario (Diálogo Interamericano, 2020).

Es en el campo de la tecnología aplicada a la educación donde hemos visto los cambios más significativos desde que fue publicado el informe de la Comisión. La pandemia y el cierre masivo de escuela que forzó, le dieron a la educación remota y el uso de tecnologías aplicadas a la educación un nivel de atención inusitado (Diálogo Interamericano, 2021). Todos los países tuvieron que buscar formas de llevar a gran escala la educación a distancia. Y lo hicieron de la mejor manera que podían considerando el punto de partida y las condiciones bajo las que operaban. Forzados por esa realidad, los sistemas educativos tuvieron que innovar. Se ajustó el currículo, priorizando contenidos fundamentales. Se desarrollaron plataformas con recursos online complementadas con otros mecanismos de difusión como la radio o la televisión. Se capacitó a docentes. Directores y docentes tuvieron que romper moldes y buscar nuevas formas de enseñar. Alumnos tuvieron que aprender a trabajar solos y tomar mayor responsabilidad y las familias tuvieron que involucrarse más en la educación de sus hijos. Indudablemente el período de la pandemia ha sido un mega experimento que ha desatado fuerzas inimaginables.

La pandemia también causó un fuerte crecimiento en la adopción temporaria de modelos híbridos y virtuales en la educación superior, así como esfuerzos de adaptación curricular de las instituciones, con un enfoque en cursos cortos y especializados (Herrero-Tejada, 2022). Sin embargo, es prematuro especular que estos efectos serán lo suficientemente profundos y duraderos para afectar de manera significativa la transformación a la cual se refirió el informe de la Comisión.

Las fuerzas desatadas durante la pandemia, bien encaminadas, pueden servir de fuente transformadora para los sistemas educativos. No encaminadas, muy probablemente se disipen, resulten en frustración y profundización de los males que ya caracterizaban la educación en la región.

Las recomendaciones de política educativa que hizo la Comisión continúan siendo válidas y relevantes: el estado de la educación en la región no ha cambiado de manera significativa. Sin embargo, es muy preocupante la falta de compromiso político con las reformas y la poca persistencia en su implementación desde los Estados. Actualmente, no es que gobiernos reformistas estén enfrentando esfuerzos claros y efectivos de parte de aquellos actores cuyos intereses pueden ser afectados por las reformas. El panorama es más uno de falta de iniciativa y capacidad por parte de las autoridades educativas. Pareciera que, hoy en día, los incentivos políticos para liderar reformas profundas en estos temas son extremadamente débiles. En ese sentido, el llamado a pactos educativos que hizo la Comisión en su momento puede resultar una ilusión con baja probabilidad de avanzar en la práctica. Especialmente en el contexto de crisis de gobernabilidad que experimentan un creciente número de países de la región, la idea de planes comprensivos nacionales es de complicada implementación.

En su lugar, podemos especular que será necesario que la disrupción al statu quo se genere desde fuera del Estado. Esta visión alternativa implica apostar a que actores no tradicionales (empresas, organizaciones de la sociedad civil) desarrollen modelos alternativos (disruptivos) de enseñanza y organización escolar, y trabajen directamente con instituciones y sistemas educativos (incluyendo instituciones formadoras) para su implementación. Del mismo modo, esos actores pueden aprovechar las oportunidades a nivel local con gobiernos subnacionales (estados, provincias, municipios) que abran sus puertas a estas innovaciones disruptivas.

La hipótesis que proponemos es que, dadas las dificultades de avanzar en reformas integrales a nivel de los sistemas educativos nacionales, el liderazgo que puedan ofrecer actores no estatales se oriente a ir construyendo una ‘revolución desde el llano’, a la que las políticas nacionales tengan que adaptarse con el tiempo. En otras palabras, las recomendaciones sustantivas serían las mismas o similares a las hechas por la Comisión para la Educación de Calidad para Todos. Lo que cambiaría sería el proceso para implementarlas, poniendo el énfasis en los esfuerzos disruptivos desde fuera del Estado y en el crecimiento orgánico de iniciativas innovadoras.

1. Este artículo forma parte del volumen América Latina: la visión de sus líderes, editado por Andrés Rugeles (2024).

2. Banco Mundial, 2022, “Dos años después. Salvando a una generación”. Disponible en: https://documents1.worldbank.org/curated/en/099519106222227657/pdf/IDU0ee485f500c82d042e60a8a80732ab3beacab.pdf

3. Unicef, 2021. Nota de prensa: “América Latina y el Caribe: Cerca de 3,5 millones de niños, niñas y adolescentes podrán verse afectados por la migración el próximo año”.

4. Ver por ejemplo: el Laboratorio de Evaluación del ICFES, Colombia. Disponible en: https://www.icfes.gov.co/documents/39286/14380395/Informe+gesti%C3%B3n_2022-0909.pdf/0bdfe99a-5c83-4dde-5942-ad199457586c?t=1662740094143; el Diagnóstico Integral de Aprendizajes de la Agencia de Calidad de la Educación de Chile. Disponible en: https://diagnosticointegral.agenciaeducacion.cl/dia.html

The post Los retos de la educación en el siglo XXI en América Latina: Una reflexión crítica appeared first on The Dialogue.

Though not a course correction, China’s “decisions” will nevertheless have wide-ranging global implications, as the CCP, government, and industry all work to put China’s newest economic blueprint into practice. Indeed, the Party’s growth agenda is likely to depend more than ever on economic engagement and partnership with developing regions, including much of Latin America, as critical markets for and partners in high-tech supply chain development.

The following three key takeaways from the 2024 3^rd Plenum “decisions” are potentially impactful for the region:

China is betting on high-tech manufacturing to ensure long-term economic growth. The effects of this process are already visible in Latin America.

The 3^rd Plenum “decisions,” a more than 20,000-character-long reform agenda outlined by the CCP Central Committee, are aligned with Xi Jinping’s vision of “China-style modernization,” which ventures beyond a decades-long process of learning from the West, experimenting with policy solutions, and “feeling the stones,” so to speak, to the adoption of a much more bold and China-specific agenda that is “freed from the traditional economic growth mode and productivity development paths.”

China is determined to chart its own course, in other words—albeit through heavily state-led industrial policy initiatives. Central to this approach are what Xi has called “new quality productive forces,” or the pursuit of high-tech, high-efficiency, and high-quality to bolster economic growth. In practice, this has translated to an intense focusing of Chinese effort on boosting competitiveness in strategic sectors, such as solar, batteries, and electric vehicles, including by encouraging overproduction and overcapacity in these industries.

China is staying the course, according to §8 of the 2024 decisions, which suggests continued institutional and financial guarantees (possibly in the form of subsidies or easier access to credit) in support of next-generation industries such as information technology, artificial intelligence, aviation and aerospace, new energy, new materials, high-end equipment, biomedicine, and quantum technology.

Latin America and other developing regions will play a central role in this process. As parts of the so-called Global North restrict market access for China’s high-tech output, Latin America and other developing regions are becoming increasingly important markets for Chinese exporters. Chinese EV sales to Latin America grew by 300 percent from 2022 to 2023, according to China Customs data. With end-to-end supply chain development in mind, the 2024 decisions emphasize the continued facilitation of “international cooperation in industrial and supply chains.”

China’s foreign direct investment (FDI) in Latin America is also increasingly focused on generating markets for its high-tech goods and services. Our data suggest an upward trend for Chinese FDI in LAC in so-called “new infrastructure” industries, with ICT, renewable energy technology, and, increasingly, electric vehicles accounting for the bulk of this activity. Whether in terms of value or number of deals, Chinese FDI in these industries is on the rise, accounting for 58 percent (around $3.7 billion) of total annual Chinese FDI in the region in 2022 and over 60 percent of the total number of FDI deals announced by Chinese companies that year. The region’s supply of critical metals and minerals is also of considerable interest to China as it looks to consolidate its position across battery supply chains.

China’s provinces and municipalities will play an ever more important role in China-Latin America relations.

China-Latin America ties are forged by a tangled web of overlapping interactions and a kaleidoscopic cast of characters, with government, Party, quasi-governmental, and commercial actors all playing prominent roles. Chinese provinces and cities are also increasingly important actors in China’s local-level engagement with LAC, often through “twinning,” or sister cities/provinces arrangements. The extensive and long-standing relationships between Chile’s Coquimbo region and Henan province and Argentina’s Jujuy province and Guizhou province are well-documented in the 2020 Inter-American Dialogue report, Going Local: An Assessment of China’s Administrative-Level Activity in Latin America and the Caribbean, for instance.

As it stands, China’s 2024 decisions may very well prompt more engagement from China’s localities with parts of the Latin American region. To place more fiscal resources at the disposal of local governments, China will “expand the sources of tax revenue at the local level and grant greater authority for tax management to local governments as appropriate.” In theory, this means that Chinese localities will rely on their respective tax bases (including their companies) for more revenue and to address their debt issues. This dynamic may very well drive more company-led, overseas activity in sectors of top importance to China, furthering a process of localization that is already well underway in the China-Latin America dynamic.

China’s industrial strategy will be met with resistance, including in parts of Latin America.

China’s reform agenda is expansive and ambitious, and its implementation will continue to be met with strong headwinds, as China “braves uncharted waters” and “ventures into dangerous shoals,” as the decisions document puts it. Even if “new quality productive forces” boost domestic growth prospects, China will continue to grapple with its real estate bubble and related, highly indebted local government financing vehicles, among other pressing challenges.

China’s headwinds will also blow from abroad. As China doubles down on science and tech production, efforts to offload overcapacity in strategic sectors will be met with ongoing resistance among competitor industries—in the “Global North,” certainly, but also in parts of Latin America. Mexican, Chilean, and Brazilian steel tariffs were a recent reaction to China’s efforts to offload part of its extensive overcapacity. Brazil’s EV tariffs, though largely symbolic, are another example of regional resistance to booming Chinese exports. The impact on Latin American manufacturers will no doubt grow as Chinese policymakers aim to boost their competitiveness in more sectors, such as semiconductors, medical equipment, and machine tools.

The post China’s 3rd Plenum—Three Takeaways for Latin America appeared first on The Dialogue.

In large part, these challenges are his legacy as they result from the decisions implemented in his first presidential term.

Paradoxically, when it comes to overcoming the country’s main problems, President Bukele is his own worst enemy.

President Bukele’s mandate should consist of modernizing the country, making it economically dynamic, socially cohesive, and democratic once again. To this end, it is important for the president to promote both dialogue and agreement on a social contract for El Salvador based on the premise of social inclusion and a democratic, equitable, and the free participation of society.

This commitment would mitigate fears of authoritarian radicalization and would resolve some of the challenges Bukele faces as El Salvador’s head of state.

The Great Economic Challenge – More than a Task, it is an Outstanding Debt

President Bukele opted to increase spending through public investment while also increasing the security budget. This public expenditure has been especially financed with external funds, including borrowing from international financial institutions and bond sales to the banking system and foreign investors. He invested in roads, not human capital, especially during election year.

The president has indebted the country by at least US$7,767 million during his first term for an accumulated debt of nearly 90 percent of national income. Even after his fiscal plan to reduce spending, which fundamentally sacrificed the pension fund, the deficit hovers around 4.5 percent of gross domestic product (GDP).

In fact, the increase in public expenditure has visibly risen from 15 to 20 percent of GDP between 2019 and 2023.

Unfortunately, this indebtedness and public works-directed spending did not produce increases in growth, productivity, or formal employment.

The problem is that contractual and financial obligations are vast and translate into a debt service that is three percent of GDP and growing.

Bukele’s second term begins with an indebtedness that weighs on the people. This is a delicate situation because the two most important sources of economic growth, remittances and exports, are not growing.

The country’s economy is 78 percent sustained by three activities: remittances (26 percent), public expenditure (20 percent), and exports (31 percent). The rest takes place within the informal economy and a business sector that is reluctant or insecure about investment.

Public expenditure is at risk of decreasing due to the debt the government has already acquired, and its accompanying external and internal payment obligations. In other words, to maintain a 20 percent level of public expenditure, the government must either borrow more, raise taxes, make other deals with the banking sector, or continue its indebtedness to the pension fund. The impact of borrowing on the pension fund cannot be ignored. By April 2024, the government borrowed more than US$1,500 million from the pension fund and the mechanism used for this is not transparent. More importantly, it has been used to finance government spending without a clear plan for future repayment. Given the current economic challenges, the impossibility of paying this fund will have consequences for retirees in the future. Not only is this spending unsustainable, but a healthy recovery of the pension fund debt is not anticipated.

Figure 1: The Salvadoran Economy: Exports, Remittances, and Public Expenditure

Source: Banco Central de la Reserva, El Salvador

Things are not looking well for exports and remittances either. According to data from the Central Bank of El Salvador, during the first six months of 2024, exports fell five percent and imports grew only one percent. Meanwhile, remittances grew two percent (highly underutilized Bitcoin and Chivo Wallet transfers have also dropped from 39 to 29 million).

The role of remittances is vital for the country as they fuel private domestic consumption. Between 2017 and 2023, in the face of poor economic performance from both the public and private sector, remittances grew from 20 to 30 percent of private domestic consumption. Even with increased public expenditure and consumption growth from remittances at 30%, the economy still slowed down.

The issue of remittances is critical for two reasons: first, because they grow fundamentally as a function of migration; and second because their impact on economic growth depends on how they are (or are not) leveraged. In the first case, Salvadoran migration will decelerate, not because the country is safer, but because many people have already left. The ability to leave the country is also decreasing as the economic and social burden of the labor force increases; the labor force is smaller than the elderly and minor populations. Declining migration will mean that the volume of remittances will not grow by more than 30,000 new households receiving money. Second, El Salvador does not have a financial inclusion strategy that focuses on formalizing the savings and investments of remittance-receiving households. This situation reduces the capitalization of savings capacity and the amount of savings within the financial market.

In terms of exports, El Salvador lacks economic complexity. Of its exports under the CAFTA and Trade Partnership with the European Union, 90 percent are concentrated to 10 commodities, of which textile exports account for more than 70 percent and coffee and sugar, 15 percent. Changes in global competition and in the investment climate towards this country have reduced export performance.

Macroeconomically, El Salvador is not in a good position.

In order to stabilize the economy with greater income that reflects improvements in macroeconomic indicators and social welfare, it is important that the country takes advantage of the next few years to invest in human capital, financial inclusion, and a transparent fiscal plan that resolves its debt on workers’ pensions. It must be kept in mind that, although the country may have less than 900,000 pension contributors, in a labor force of 3.5 million workers, these future pension beneficiaries are a source of employment and consumption, and current interference will have major long-term consequences.

Reconstituting a Fragmented Society is Imperative

There are many questions about the promises made by the president in his first electoral campaign. He has managed to neutralize the threat of the maras and Salvadorans do certainly feel safer.

Now, however, El Salvador enters a new period in which its society has become substantially fragmented – an everyday reality experienced by its people. Fragmentation is found in at least three major segments: prevailing social inequality, migration, and incarceration.

Social inequality in El Salvador has increased in recent years. According to data from the World Bank, the Gini index shows that the gradual decrease in inequality remained stagnant during Bukele’s five years at 39/100. This statistic had been declining from 51/100 in 2001 and has remained at 39 since 2019.

An example of this inequality is unimproved performance among public schools. Illiteracy remains prevalent and stagnant, with at least one in 10 Salvadorans unable to read or write. Additionally, as of 2022, the country experienced one of the lowest school performance rates in the world. As of 2024, enrollment has not grown during his government and has maintained a matriculation of 1.1 million students – down from 1.4 million in 2018 even though the number of school-age children has grown. One of the factors associated with this decline may include dropout rates which could be related to migration.

With these and other educational challenges, it does not make sense that the state reduced its education spending from 18.5 percent of its total budget spending in 2018 to 18 percent in 2023. Regrettably, the country is paying as much for its debt service as it is on education.

Another challenge facing the president is to bring together a transnational family by building institutional ties that strengthen the material and emotional ties between the diaspora and El Salvador. Although the president claims otherwise, more Salvadorans have left the country recently than in previous years or decades. Departures are not disparate; both regular and irregular migratory growth has been high under Bukele. Outreach to the diaspora must be sincere. El Salvadorans abroad may be prepared to stand up for the president, but they have yet to go to El Salvador and see him or their relatives.  The growth of the diaspora’s tourism in 2018 increased one percent year-over-year, from 282,164 to 303,195 in 2023.  This type of tourist makes greater contributions to the economy than other tourists.

Table 1: Migration to the United States: Migratory Detention Data

Source: DHS, US Department of State, Immigrant visas issued by the issuing office. *Number decreases due to appointment closures in 2020 due to the pandemic period.

The reasons behind migration can be complex, and include the country’s poor economic performance, fear of the current government’s concentration of power, and the urgency of family reunification. But in practical terms, El Salvador is a country where more than 80 percent of households have a family member abroad. Among the less than 1.5 million households, one million receive remittances.

This migration reflects important dynamics, one of which is of a demographic nature. Annually, since 2019, at least one percent of the population has left for the United States alone, an amount that is almost double that of previous periods.

Figure 2: Arrival of Salvadorans as a Percentage of El Salvador’s Population

Source: DHS, World Bank

While school dropouts continue, the number of unaccompanied children migrating is at least 13 percent of all Salvadoran migration to the United States. It is no accident that more children are migrating than the increase in annual high school enrollment. Overall, the demographic effect is large because the size of the labor force is declining as economic obligations continue and even grow.

This government has the challenge of designing social inclusion policies and engaging with the diaspora at many levels beyond the sending of remittances. Such issues include advocating for the regularization of Salvadorans abroad, formalizing development alliances to invest in education and human capital – which is especially important for a country whose natural resources are scarce and modernization requires competitiveness in the knowledge economy and promoting financial inclusion among remittance recipients.

Another vital challenge to social cohesion is related to reintegrating prisoners who have served their sentences and learning what extent the policies of the territorial plan of Reconstrucción del Tejido Social y los Centros Urbanos de Bienestar y Oportunidades (CUBO) have been successful versus its role as an instrumental component of political marketing that has added to the president’s popularity. For example, the number of school dropouts during the same period of CUBO is not consistent with its success.

It is also important to keep in mind that many of the inmates sentenced to 20-years of incarceration at the end of 2000 will be released during this second term. This is a situation that highlights the need to consider how to care for thousands of released persons who must seek employment or reunite with families. Of 105,000 prisoners or more, practically one out of twenty households have a family member in prison. There are also children with parents in prison whose school performance, low results, and/or desertion are associated with this deprivation of liberty. In addition, one percent of those in prison are minors.

Many of these challenges relate to the fact that the president did not meet the goals of his own Plan Cuscatlán, in which the president promised to carry out aspects of education.

Figure 3: El Salvador’s Prison Population

Source: Insight Crime

Politics in the Face of the Concentration of Power and Authoritarianism

A democratically ruled society is one that provides accountability through institutional checks and balances, is inclusive, plural, equitable, and free, and guarantees a better quality of life for its society as its not exposed to abuses of authority, excesses of political control, or restrictions on freedom of expression. The numbers don’t lie; a country’s quality of life is higher with a democracy than without it.

Whether by design or by inertia, the first five years of government show a gradual concentration of political power by the president. This concentration seems to follow a pattern, since the consolidation of control in both the legislative and judicial branches have occurred one after another. Meanwhile, and in parallel, the government attacks the media and civil society organizations as its only means to communicate to them.

In 2024, El Salvador faces several major democratic challenges, of which the absence of checks and balances within the branches of government is one. These checks and balances have effectively disappeared with the replacement of magistrates with those who have a pro-government bias.

However, there are also other risks related to democratic backsliding such as: the presidency’s lack of transparency and communication with society; the labeling of pluralism and expressions of civil society organization as threats; situations that have given rise to a level of persecution; and procedures such as those of the Instructivo de la Unidad de Investigación Financiera de la Fiscalía General de la República (FGR) that requires NGOs to re-register – a requirement that exposes them to closure.

The completely questionable and arbitrary way the president is reelected that uses legalistic but imprecise or incorrect interpretations of Article 152 of the Constitution by his collaborationist magistrates is another action that has weakened the democratic structure. Gradually, Nayib Bukele has facilitated the concentration of political power in all areas of the state and political institutions – including the police and the army.

In fact, the interpretation of the Constitution on reelection alongside the reform to the Penal Code on electoral fraud, which penalizes a person who ‘obstructs a candidacy’ (for example the protest and questioning of Bukele’s reelection this past electoral campaign), are expressions that, when combined, become antidemocratic practices. The reform to the Penal Code, attacks on the media, trials on persons of interest, and the regulation of NGOs constitute practices that criminalize democracy.

The reduction of municipalities from 262 to 44 as a measure transferring control from these local governments to the state is part of this concentration of power. Other aspects of power concentration include the clear absence of accountability and transparency – such as the fiscal reform plans, or the legal reform to the pension fund, or the declaration of certain important information as ‘reserved information,’ and the participation of relatives of the president in the exercise of governance in the country.

Civil society organizations note that it is paradoxical that the president criticizes NGOs given that they are key actors in building a more inclusive society. Rather than including them, his attacks have left them vulnerable before the law.

The absence of checks and balances is a huge risk because El Salvador has been democratically weakened alongside its crumbling party system. Nuevas Ideas operates as the dominant and almost only political party. In the face of this, the people are left at the mercy of a single party.

Thus, political challenges go beyond the suspension of the state of exception because they include the reality of a neo-populist, self-referential, unidirectional, and vertically-driven leadership that has maintained popularity based on the management of crime reduction in the country and through the president’s political marketing.

The president’s challenge lies in maintaining his leadership and charisma while restoring checks and balances as a democratic guarantee. What remains now is the trust placed by the people in the president that he will do a good job within the framework of the democratic rule of law. However, the risks of a deepening concentration of power that has a restrictive effect on freedoms, excludes social and political sectors, and evades accountability are very high. Put differently, there is a high risk that Bukele will transfer mano dura policies to the general population.

One need not look further than Nicaragua and how Ortega gradually dismantled democratic scaffolding. He started by eliminating political checks and balances (the executive co-opting of the legislature and the judiciary), followed this by eliminating civil society organizations and political parties, and then paired these actions with attacks on the media and continued with religious persecution.

No. Bukele is not Ortega. For now. However, it is important that the president is presented with limits that prevent him from radicalizing, especially given the fact that he enjoys the support of both the police and the army.

Introducing a law controlling non-governmental organizations and increased sales taxes without a legislative and civil society counterweight exposes El Salvador to a life in authoritarian conditions.

Towards a Social and Democratic Plan to Dismantle Authoritarianism in the Making

Moisés Naim recently wrote that in these times we are witnessing a revenge of autocrats, of leaders who bet on the autocratic exercise of power, without checks and balances, accountability, and who repress with the calculation that they will not be challenged. This revenge consists of vindicating their way of governing, supported by the polarization of the population, and espousing a populist and propagandist discourse.

This polarization is evident in the region and has been growing in El Salvador with the two administrations of the Frente Farabundo Martí para la Liberación Nacional (FMLN) since the post-2009 period. The is the result of the lack of solutions by leaders to address the impact of the global recession – reaching extremes in terms of not knowing what to do. Some have bet on a combative approach while others have sought to negotiate and reconcile solutions.

The most politically attractive leaders – the populists – are those who have sold cosmetic solutions instead of actionable proposals within the legal framework: I will lead you to change, but in return, you serve me. These populists have used post-truth and propaganda to unscrupulously sell political solutions. It is a systemic political marketing campaign that, when accompanied by a developed clientelist network, gives populists an advantage over other opponents within the polarized rhetoric.

For Bukele, resuscitating mano dura while the maras were already in decline was his solution.

Figure 4: El Salvador: Homicides, Migration, and per capita Income

Source: DHS, Nationwide Encounters. Police reports and World Bank Development Indicators.

This situation does not occur within a void but occurs in moments when society feels greater discretion and control to deposit a little more of its sovereignty in others (the state and the market). The enjoyment of liberties is elastic, and, in some cases, society tolerates greater controls in exchange for answers, solutions, or expectations. Thus, the Salvadoran people have surrendered their sovereignty to populists in a polarized environment that demands solutions.

So far, however, no such leader has offered the right solution, neither Andrés Manuel López Obrador, Gustavo Petro, Nayib Bukele, nor Manuel Zelaya. However, in the process these leaders have been gaining more power and using it to their advantage, weakening the opposition, and changing the political balance of power. They become stronger through rhetoric and laws and achieve continuity in power through lies or half-truths.

With Bukele, once the excuses are exhausted, the absence of economic and social solutions will bring to light his true inability to govern. Therefore, the president will have to seriously undertake actions that include democratic restitution, social inclusion, and economic modernization.

In 2024, Bukele won with the same low voter turnout as before – 57 percent of registered voters. After years of shock therapy against the gangs, it is no longer an excuse to say that the economy is not growing because of the gangs (putting aside the fact that he gave the coup de grâce to the already declining gangs).

In this sense, there is an opportunity for the president to anticipate a political backlash and prevent an economic debacle. Salvadorans, just like they bestowed their trust, can withdraw it.

It is more viable for the president to commit his work to a strategy that is accompanied by a social contract that includes all sectors of the country rather than alienating them. However, the risk of facing a repressive regime in the face of the strong concentration of power may be high in a scenario in which the economic deterioration is unmanageable, social protest grows, and the government responds aggressively. The political crisis in neighboring Nicaragua began with protests resulting from Daniel Ortega’s manipulation of the social security system.

This strategy must have at least three axes: social, political and economic. Agreements must revolve around investing in human capital (education, technology, health) and financial inclusion (increasing the formalization of savings, mobilizing them into credit, expanding payment technologies to the base of the pyramid). On the economic front, this includes a fiscal plan, reviewing the state of pensions, building a better alliance with the diaspora to co-invest in order to reduce the size of the informal economy, modernizing micro-enterprises through technology, and directing incentives towards the knowledge economy. On the political side, incentives must be created to increase organized social pluralism, encourage public debate, and stop the persecution of the media, as well as enter into a political dialogue to revitalize the party system and restore the system of checks and balances.

In the hands of President Bukele, the future of El Salvador depends on whether he holds himself accountable and delivers positive results or if he expects that the people serve him.

The post Today’s Challenges for Salvadorans in the face of the Current President’s Legacy appeared first on The Dialogue.

Unchecked political ambitions and abuses of authority in the form of corruption or political and economic favoritism are signs of severe democratic backsliding. Nicaragua is an illustration of the consequences of unconstrained power. But the growing corruption and political ambitions of other Central American leaders could further affect democratic institutions in the region. It is important not only to bear witness but to mobilize proactive foreign policy to prevent authoritarianism from rising.

Political Confinement as Punishment for Dissent

In Nicaragua, the increasingly autocratic Ortega-Murillo regime has repressed all forms of dissent after the massive 2018 protests.[1][2] It has closed all independent media outlets and persecuted journalists, eliminated civil society organizations, suppressed religion freedom and other basic human rights, banished the real opposition, and incarcerated or exiled everyone who opposes it or thinks differently.

Social discontent in the country began after several fraudulent elections and systematic attacks on democratic institutions.[3] In 2021, only months before the general elections, the Ortega-Murillo regime arrested all presidential candidates, along with leaders of the private sector, political parties, and activist groups. Despite their ideological or political differences, the one thing they had in common was their conviction that the transition back to democracy had to take place through free, fair, and supervised elections.

They were arrested in violation of their civil rights, subjected to ill-treatment, psychological torture, and kept in a Stasi-style prison. During that time, they were subjected to unjust trials, found guilty of fabricated charges and, without due process, sentenced using newly approved, Russian-inspired, repressive legislation.

Due to increasing pressure from the international community, including targeted sanctions, Ortega decided to throw 222 prisoners out of the country. On the morning of February 9, 2023, a plane chartered by the Department of State lifted them from Managua and brought them to Dulles International Airport. Subsequently, Ortega stripped them of their nationality and confiscated their assets. The UN recently deemed these actions, together with other atrocities committed by the regime during the protests of 2018, as crimes against humanity. [4]

A History of Power Grabs

Daniel Ortega first obtained de facto power in 1979, when the Sandinista guerrillas, surfing a wave of widespread insurrection, overthrew the Somoza dynasty. He and his fellow socii armis sought to turn Nicaragua into another Cuba. They built a totalitarian socialist dictatorship, transferred all means of production to the state, wiping out more than 40 years of economic development in the process.

The US government-supported Contra War, coupled with the fall of the Soviet Union in the late 1980s, caused a social and economic crisis that gave the Sandinista regime no choice but to accept democratic elections in 1990. Democracy was short-lived. In 2006, Ortega returned to power, this time not through an armed conflict, but through the ballot box, adding his name to the long list of autocrats that have returned to power through elections.

Ortega was able to secure his return to power through another phenomenon that is choking democracies throughout Latin America: changes to electoral rules. [5] As part of an arrangement with the center-right Liberal Party, Ortega was able to force constitutional reforms that granted impunity from corruption charges to then-President Arnoldo Aleman. This was exchanged for the lowering of the percentage required for a runoff election from 50 to 35 percent. The profound division that this pact caused within the Liberal Party allowed Ortega to win the election with a minority of 38 percent against a fractured opposition.

Since 2006, Ortega has been applying the “elected dictators’ manual” and has repeated his well-learned tactics from his days as the leader of the Sandinista totalitarian regime of the 1980s. He made people believe that he had become more democratic, all while gaining control of the judiciary.

Once he seized the judicial branch of government, the road was clear. He used his authority to threaten, blackmail, extort, and coopt all sectors of society, and amassed greater control over the electorate, which in turn, allowed him to win an opaque, non-competitive general election in 2011, gaining absolute control of the legislative branch of government. With absolute command and authority over the state, he put his closest allies in charge of the police and the army and built a formidable paramilitary force. Once he attained a full monopoly of the institutions and the security apparatus, without any available institutional checks and balances, he sought a third term in November 2016, certain of an uncontested victory.

Although people protested the elections, which were considered fraudulent by the international community, they crashed into a wall of violent police repression. Social discontent reached a climax, and, by April 2018, the popular uprising was widespread. Ortega ordered his security forces to suffocate the protests at gunpoint. The result was widely documented by international human rights organizations: nearly 400 people were killed and over 1,000 people were incarcerated on politically motivated charges over a period of less than three months.[6] From that moment on, Ortega established a state of exception.

By 2021, the opposition, fragmented for years by the regime, was nonetheless beginning a process of coalition building for that year’s November general elections. Victory for the opposition was peeking out around the corner. Yet, with just five months before the election, Ortega decided to disband opposition political parties and expanded the crackdown by arresting presidential candidates and leaders from all sectors of society. Thus, Ortega secured his hold on power by force while eliminating civil and political opposition.

Changing Attitudes toward Democracy

In the early 1990s, the turn to democracy in Nicaragua was part of the democratic wave in Latin America. But just a couple of decades later, much of the region began to regress. This reversal was the result of years of continuous and systematic deterioration of democratic institutions and weakened support for democracy from dissatisfied populations.

Latinobarómetro, an NGO from Chile which has been conducting political opinion polls for decades, shows that there has been increasing indifference about the type of regime that prevails. Specifically, there is a growing preference in favor of “effective” governments and growing dissatisfaction with political parties and government performance. More worrisome is that polls show that, over time, fewer people perceive democracy as the best form of government, leaving the area prone to non-democratic regimes. [7]

There is no single explanation for this phenomenon, but changing electoral rules seems to be one of them. Reelection is not necessarily bad for democracy; however, the chances of power sharing suffer when the incumbent changes or twists electoral rules to remain in power. Another endemic problem that has spread over Latin America’s limited democratic life is corruption. This abuse of authority drains scarce resources away from activities that could increase prosperity. Moreover, when corruption is coupled with crime, it is devastating for productivity and growth.

Corruption: A Central American Hurdle

Aside from the despotic Ortega regime, some analysts point out other authoritarian trends in Central America.

In El Salvador, the government of President Nayib Bukele has been able to amass popular support by reducing crime and increasing security through a mano dura policy on gangs. These actions were undertaken by the government during a state of exception approved by the Bukele-controlled National Assembly which has suspended procedural guarantees and constitutional rights in the country. Human rights organizations accuse the Salvadoran government of failing to guarantee liberties and human rights while implementing its security policy and fear that the same methods may be eventually used to quash dissent and silence critical voices. [8] In addition, Bukele, now in absolute control of the state without the presence of institutional checks and balances, changed electoral rules to allow his reelection – a first in the country.

In Honduras, critics of the government have pointed out that polarization coincides with corruption when political elites in the ruling party seek to coopt the judiciary and peddle influence in the legislature. Institutional weakness, corruption, violence, and impunity, according to well respected organizations, undermine the long-run stability of Honduras. [9]

Earlier this year in Guatemala, the incumbent political forces and other interest groups waged a ferocious battle against a smooth transition of power to the newly elected government of Bernardo Arévalo. There were widespread claims that, to preserve elite power, the former government had used the law as a political weapon to prevent investigations into high-level corruption and to undermine democratic institutions. [10] Although Arévalo has expressed his willingness to build robust and healthy democratic institutions, his government faces the dual challenge of meeting enormous expectations from the population and governing with a very weak position of the Semilla party in the legislature, with only 23 out of 160 seats. Therefore, despite a successful transition, democracy hangs by a thread.

Curiously, except for Arévalo’s, these governments have failed to denounce the widespread violations of human rights in Nicaragua. Bukele has preferred to remain silent regarding the atrocities committed by Ortega, and even worse, the Honduran president, Xiomara Castro has defended the non-democratic regimes of Cuba, Venezuela, and Nicaragua – advocating against US sanctions targeted at individuals committing acts of corruption and human rights violations.

In Panama, where elections are around the corner, former President Ricardo Martinelli, who had appeared in polls as the front-runner, was disqualified from running. He was sentenced to 10 years in prison for money laundering. Panama’s Electoral Tribunal allowed his running mate and former public security minister of Martinelli, José Raúl Mulino, to take his place. Some claim that Martinelli, who has received asylum from the Nicaraguan regime and is currently living at the Nicaraguan embassy in Panama, continues to actively participate in politics, supporting the candidacy of Mulino. What will be the fate of Panamanian democracy following a Mulino victory?

The Consequences of Complacency

These trends pose challenges to US policy in the region. First, the deterioration in democratic institutions feeds directly into migration flows. Experts estimate that nearly a million people from Central America will migrate to the US every year in the next three years. US border authorities are recording more than 250,000 illegal entries per month. [11] While this does not consider net migration due to deportations, it is nevertheless concerning. Other domestic implications for the US range from security concerns to drug-trafficking and transnational organized crime.

Second, in a globalized world, democratic decay in Central America also causes social deterioration, which affects the productive capacity of these countries. This, in turn, impacts US competitiveness vis-à-vis other non-democratic states like Russia, China, and Iran, who are seeking to expand their influence in the region.

Finally, these migration flows increase a relationship of dependence. Family remittances comprise more than 20 percent of GDP in Guatemala, El Salvador, and Honduras. In Nicaragua, the country with the largest democratic setbacks, the economy’s dynamics are dependent almost entirely on remittances. In 2023, 30 percent of the country’s national income will come from family remittances. [12] The consequences of remittance dependence are devastating for future productivity and growth in the region, especially when these monies are not leveraged in labor markets and through financial inclusion.

While there have been some sporadic foreign policy efforts by the US to address these problems, there is not an integrated effort to support democracy and discourage authoritarian trends. The lack of a consistent policy approach to this problem is creating a dangerous precedent for the rest of Latin America and for other parts of the world where democracy is also in decline.

The US must establish a coherent policy framework, consistent with its own foreign policy commitments, to discourage these authoritarian trends in the region. The risks of inaction are more costly than more active involvement.

Policy indifference will generate poor outcomes and will exacerbate the trends discussed above. The region could see more antidemocratic regimes like the one present in Nicaragua. These governments will crack down on dissent, kill protesters, put people in jail for expressing criticism, eliminate any form of political competition, close all independent news media, coopt security forces and use them to crush dissent, suppress rights, destroy civil society, the rule of law, and private enterprise. Allowing the slow death of democracy will destabilize the region and send a wave of people north with all the domestic consequences it entails.

Luis A. Rivas is a non-resident senior fellow at the Inter-American Dialogue and a Principal at Varyag Consulting Group, a strategic advisory firm that assists business leaders worldwide on issues of intelligence, security, business strategy, financial transactions, diplomacy, and government relations. This article is based on a lecture given at the Institute of World Politics in Washington DC.

ENDNOTES

[1] See the annual report of the United Nations High Commissioner for Human Rights and reports of the Office of the High Commissioner and the Secretary General. https://www.ohchr.org/sites/default/files/documents/hrbodies/hrcouncil/sessions-regular/session55/advance-versions/a-hrc-55-27-aev.docx

[2] See the report to United Nations Human Rights Council by the Human Rights Experts on Nicaragua about the human rights situation in the country. https://www.ohchr.org/sites/default/files/documents/hrbodies/hrcouncil/sessions-regular/session52/advance-version/A_HRC_52_63_AdvanceUneditedVersion.docx

[3] There are several technical reports showing evidence of fraud in various electoral processes: The Institute for Democracy and Development (IPADE for its Spanish acronym) provides evidence of the frauds that took place in the 2008 municipal elections and the 2011 general elections; Etica y Transparencia and Transparency International also provide evidence on the shortcomings of the 2008 and 2011 electoral processes; the Electoral Observation Mission of the European Union seriously questions the 2011 electoral results; and, the Carter Center issued a press release referring to the 2008 fraud and the subsequent degeneration of the electoral processes.

[4] See Endnotes 2 and 3.

[5] See the Latinobarometro report on the democratic regress in Latin America. F00016664-Latinobarometro_Informe_2023 (2).pdf

[6] See the InterAmerican Commission on Human Rights (IACHR) report about the human rights violations in Nicaragua in relation to the violent events that took place since the State repressed the 2018 protests. Nicaragua2018-en.pdf (oas.org)

[7] See Endnote 6.

[8] See Human Rights Watch’s World Report 2023 World Report 2023: El Salvador | Human Rights Watch (hrw.org)

[9] See Human Rights Watch’s report on corruption in Honduras. https://www.hrw.org/news/2023/06/09/honduras-strong-action-needed-corruption

[10] See statement of the Council of the European Union about the undermining of democracy and the rule of law in Guatemala. https://www.consilium.europa.eu/en/press/press-releases/2024/02/02/guatemala-council-sanctions-an-additional-five-individuals-for-undermining-democracy-and-the-rule-of-law/

[11] See Inter-American Dialogue in depth analysis https://www.thedialogue.org/blogs/2024/02/migration-and-remittances-an-outlook-for-2024/ and https://www.thedialogue.org/analysis/an-unprecedented-migration-crisis-characterizing-and-analyzing-its-depth/

[12] See the International Monetary Fund remittance forecast in their concluding statement under Article IV of November 2023. Nicaragua: Staff Concluding Statement of the 2023 Article IV Mission (imf.org)

The post Democracy Under Siege in Central America appeared first on The Dialogue.

This migrant population in the US is remitting half of all flows reaching their homelands in the Andes, over US$10 billion in 2022 and US$11 billion in 2023. The following briefing offers a characterization of migration from the following Andean countries: Bolivia, Colombia, Ecuador, Peru, and Venezuela.

Migration in the Andean Region

The number of people from the Andean region leaving their countries has increased relative to global migration, from one percent of all migrants worldwide to four percent in 2020. This percentage may be higher as we reach the first half of 2024. When compared to other Latin American and Caribbean migrants, their share is at least 60 percent as of 2020.

FIGURE 1: ANDEAN MIGRATION TO LATIN AMERICA AND THE CARIBBEAN, 1990-2020

Source: United Nations Department of Economic and Social Affairs (UNDESA), 2020

The post-pandemic increase can be attributed largely to Venezuelan as well as Colombian and Ecuadorian migration to the US – mostly as irregular migration at the Mexico-US border. Overall, the intention to migrate seems to be significant across nationalities, with one third to half of people looking to leave in the next 12 months.[1] This intention is particularly pronounced in countries that have had sustained recent political, security, and socio-economic crises. From 2022 to 2023, Peru and Ecuador saw some of the highest increases in the intention to migrate from the Americas [2].

Figure 2: Composition of Andean Encounters at US-Mexico Border, 2020-2024

Source: Department of Homeland Security (DHS), 2024, Note: Bolivia is not included in DHS encounter data

Figure 3: Andean Share of US Border Encounters, 2019-2023

Source: Department of Homeland Security (DHS), 2024, Note: Bolivia is not included in DHS encounter data

According to US Census data, Andean migration to the US has largely consisted of Colombians, followed by a roughly even number of migrants from Ecuador and Peru. Since 2019, the Venezuelan share of Andean migration has grown, specifically in 2021 and 2023. Last year, the share of Andean migrants to the US grew as well reaching 23.6 percent of all US encounters – a rapid increase from just 3.3 percent in 2020. These increases are largely attributable to Venezuelan immigration, but steady flows of people from Colombia and Ecuador have accompanied them.

Central to this pattern is the United States as a major destination or migrant host country, though in decreasing numbers relative to total migration to the US. Andean migrants in the US accounted for 33 percent in 1990 and dropped to 20 percent in 2020 as a share of all Andean migrants worldwide.

Migrants from the Andes region, in general, are considering multiple destination countries, and their proportion of US immigrants has only risen from four percent to just under six percent over the past two decades.

Additionally, as migrants continue to journey to traditional destination countries like the US and Spain, they are increasingly staying within the Latin America and the Caribbean (LAC) region. This number has been growing steadily in each country since the 1990s and in just five years, the number of Venezuelans who left their country for another in the LAC region grew from 175,000 in 2015 to over four million in 2020. As of 2022, this number is now over five million, according to the UN. Therefore, Andean migration is not only a relevant trend for the US, but also countries in the region – even if intraregional migration is transitory[3], as the numbers may suggest.

FIGURE 4: US DESTINATION SHARE (PERCENT OF TOTAL ANDEAN MIGRATION)

Source: United Nations Department of Economic and Social Affairs (UNDESA), 2020.

FIGURE 5: US BORDER ENCOUNTERS OF MIGRANTS FROM ANDEAN COUNTRIES, 2019-2024

Source: Department of Homeland Security (DHS), 2024; Note: Bolivia is not included in DHS encounter data

FIGURE 6: SHARE OF ANDEAN MIGRANTS IN US (PERCENT OF TOTAL FOREIGN-BORN POPULATION IN US), 2000-2022

Source: US Census Data (2000-2023), ACS figures.

TABLE 1: ANDEAN MIGRANT POPULATION IN THE US, 2022

Source: US Census Data, 2000-2023

FIGURE 7: US VISAS GRANTED TO ANDEAN MIGRANTS, FY2014-FY2023

Source: US Citizenship and Immigration Services (USCIS), 2014-2023

Remittances from the Andean Region

According to Comunidad Andina in 2022, the Andean countries received over US$20 billion, 53 percent of which came from the United States. Compared to LAC region’s nine percent growth in remittances from 2022 to 2023[4] from the US, growth was stronger in the Andes at 11.5 percent. The US share of these flows not only stem from migration but also larger remitted principal amounts than other origin countries, including Spain.

Migrants in the US tend to send more than 15 times a year and in averages sent close to US$400. The highest and most consistent growth in principle sent has been in Colombia and Ecuador, both with a ten-year average growth rate of 10 percent. A pricing analysis[5] conducted by the Inter-American Dialogue in January 2024 found that the average cost of sending US$ from the US to Colombia was 3.54 percent – slightly higher than the average cost for the LAC region, 3.22 percent.

FIGURE 8: ANDEAN REMITTANCE ORIGINS IN 2022

Source: Comunidad Andina, Member State Central Banks. Decisión 756, Resolución 1433.

TABLE 2: AVERAGE REMITTED FROM US TO THE ANDEAN REGION (USD$)

Source: Money transfer companies originating flows from the US

TABLE 3: VOLUME OF REMITTANCES FROM US TO THE ANDEAN REGION, 2022-2023 (in millions US$)

Source: Author estimates using migration, and average remittance figures

TABLE 4: ANDEAN REMITTANCE ORIGINS, 2017-2022

Source: Comunidad Andina, Member State Central Banks. Decisión 756, Resolución 1433, 2022.

FIGURE 9: ECUADORIAN ENCOUNTERS AND MIGRATION FACTORS, 2019-2023

Source: Observatorio Ecuatoriano de Crimen Organizado (OECO), Department of Homeland Security (DHS) – Note: 2019 contains only Q4 numbers, World Bank Data, 2024

ENDNOTES

[1] Equilibrium CenDE, a public opinion and research firm based in Lima reports their survey data.

[2] Lupu, Noam, Mariana Rodríguez, Carole J. Wilson, and Elizabeth J. Zechmeister (Eds.) 2023. Pulse of Democracy. Nashville, TN: LAPOP.

[3] Muñoz, Betilde, and Alexandra Winkler. 2023. “The Persistence of the Venezuelan Migrant and Refugee Crisis.” CSIS.

[4] Orozco, Manuel, and Patrick Springer. 2023. “2023 in Remittances: The Year in Review – The Dialogue.” Inter-American Dialogue. https://www.thedialogue.org/analysis/2023-in-remittances-the-year-in-review/.

[5] Orozco, Manuel, and Patrick Springer. 2024. “Transaction Costs and Money Transfer Operators – A Review of Costs by MTO Receiving Countries.” Inter-American Dialogue. https://www.thedialogue.org/analysis/transaction-costs-and-money-transfer-operators-a-review-of-costs-by-mto-receiving-countries/.

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Latin American Migration in 2024 

Reactions that cause migration flow are undeniable and non-negligible. Slavoj Zizek’s argument that people’s reactions on immigration are similar to those of dramatic experiences—a combination of denial, anger, bargaining, depression, and acceptance—are explained by the magnitude of the problem. 

That is because considering migration and remittances patterns in Latin America and the Caribbean takes you to problems that relate to trends that have existed since circa 2019.  

Migration patterns continue as they did between 2018 to 2023 and are driven predominantly by supply factors associated with political conditions (aspirational issues in particular), economic performance (slow growth and lagging social inclusion); and subsidiary factors, including natural disasters or an acute crisis.  

Transnational ties and the demand for foreign labor are also important considerations as they have played an intervening role. Incomplete explanations label Biden policies as insufficient yet fail to acknowledge that migration continued to increase even while Title 42 remained in effect during his term. Similarly, despite the existence of the Migration Protocols, migration persisted without a significant impact while they were in operation. 

It is important to consider the following issues: 

1. The migration waves shaping mobility over the past five years are largely associated with local countries’ political dynamics. The recent migration waves, which have influenced mobility over the past five years, are primarily linked to the political dynamics within the respective countries of origin. Migration from El Salvador, Guatemala, Honduras, Nicaragua, Cuba, Haiti, and Venezuela represents 60 percent of all migration. These countries are characterized by corruption, weak rule of law, and state fragility, which significantly influences their political landscapes. The intention to migrate from these countries has been 25 percent of households on average, meaning it is unlikely to drop under these circumstances as the appetite to leave is steep. 
2. Mexican migration has also been on the rise which may be connected to more complex issues, including transnational family unification, demand for labor, and conditions in Mexico. 
3. To some extent, it is likely that the administration’s measures to curb migration will succeed. By how much depends on the measures to be adopted including introducing a new approach to Title 42, border closure if there are over 4,000 daily entries (Migrant Protection Protocols — also called the Remain in Mexico policy), and an expedited and more restricted asylum process. 
4. The various forms of migration are noteworthy: five percent consist of unaccompanied minors (UAC), 35 percent involve families, and charter flights were utilized by seven percent of migrants in 2023. 
5. The current political debate gravitates between asylum relief and border closure. But the crux of the problem is foreign policy. Given this is an election year and the fact that neither contender wants to address foreign policy despite its second-place position on the electoral agenda, only drastic measures would reduce migration by a third to one million. The most likely outcome is a drop to two million.

Family Remittances 2024 

The trends and patterns shaping family remittances in 2024 relate mostly to migration, given that economic conditions in the United States point neither to inflation nor an increase in unemployment but rather a stabilizing pattern between supply and demand.  

An increase in family remittances will occur mostly from new migration rather than increases in the average remitted between 2020-2022.  From a conservative scenario projecting that migration will be 80 percent of what it was in 2023, growth in family remittances will be slower, but still growing, nonetheless, around six percent. However, the contribution of remittances will continue to be strong in the recipient countries’ economies. 

Migration to the United States: Legal Migration, Apprehensions, and Processes Under Review (Asylum)

Source: Apprehension/Encounter data: Nationwide Encounters, US Customs and Border Protection. Visa data: Visa Statistics, Monthly Immigrant and Nonimmigrant Visa Issuances Data, Bureau of Consular Affairs, travel.state.gov. Asylum data: Department of Homeland Security, U.S. Citizenship and Immigration Services, Refugee, Asylum and International Operations Directorate (RAIO)

Border Apprehensions at the US Border

Source: Apprehension/Encounter data: Nationwide Encounters, US Customs and Border Protection.

Migration and Remittance Data: Mexico and Central America

Source: Central Bank data; author estimates based on migration flows, natural annual sender increase without migration, and survey data on principal remitted annually.

Family Remittances as Share of GDP

Source: Central Banks, World Development Indicators, and IMF data for 2023.

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Ecuador witnessed chaos shortly after two key leaders from the criminal groups ‘Los Choneros’ and ‘Los Lobos’ escaped from prison. Their escape followed Ecuador’s newly elected President Noboa’s announcement of ‘Plan Fénix,’ a national security strategy focused on investing in strategic and operational intelligence, including the construction of maximum-security prisons and extradition of organized crime leaders. Riots broke out in three prisons and over 100 prison guards were taken hostage.  

The situation escalated with kidnappings, car bombs, brazen armed attacks on a TV station (TC Televisión) and public universities, as well as the recent murder of the prosecutor investigating these attacks. This occurred at a time when Ecuador’s attorney general, Diana Salazar, disclosed ‘Caso Metástasis,’ a corruption investigation implicating state officials in drug trafficking. 

Citizens are reasonably demanding immediate answers as the rapid escalation of criminal violence in Ecuador calls for urgent and effective actions. President Noboa has declared a nationwide state of emergency, a tool employed by previous governments. In doing so, he went as far as to declare the existence of an ‘internal armed conflict,’ raising questions about the applicability of international law.  

Considering that the security crisis in Ecuador stems from interrelated structural factors, any response cannot be confined to short-term measures. It must also include structural solutions encompassing social, economic, and political reforms addressing the root causes of violence. With a recorded rate of 45 homicides per 100,000 inhabitants (twice the rate in 2022), Ecuador has become one of the most dangerous countries globally. These rates did not spike overnight. The failure of previous governments to implement effective long-term public policies addressing poverty, corruption, a prison system run by criminal gangs, unemployment, education disparity, and drug abuse has contributed to widespread insecurity.  

In a region grappling with criminality, the adoption of abusive punitive security policies, blatantly exemplified by El Salvador’s ‘mano dura’ model, has gained popularity due to its short-term effectiveness in addressing insecurity, despite its huge costs to the rule of law incurred.  

The recent events in Ecuador have terrorized a population that has not experienced this type of violence before, fostering popular support for the implementation of similar tough-on-crime measures. President Noboa’s limited one-and-a-half-year term, as well as the escalating demand for these types of measures may compel the president to strategically embrace this approach to garner public support prior to the 2025 election. 

In the upcoming days, President Noboa has the urgent task of restoring at least some semblance of tranquility that allows Ecuadorian citizens to resume their day-to-day activities. Yet, to succeed in addressing the escalating security crisis, he should demonstrate that Ecuador can address insecurity and violence within the rule of law through a dual strategy. Combining punitive measures with a corruption-free judiciary and proactive social initiatives targeting root causes provides a feasible solution for a sustainable and effective long-term security policy. 

This approach includes an impartial administration of punitive measures, building public trust in the judiciary, and addressing socio-economic factors that contribute to criminal behavior. To achieve this, international collaboration and learning from successful models is not only crucial, but necessary. The support expressed by 38 countries, including the United States, offers a glimmer of hope. However, it is essential that this support goes beyond security infrastructure investment. 

Adopting harder, long-term solutions to structural problems is less politically rewarding, particularly in the context of an upcoming electoral cycle. Yet the easy road will not effectively solve the problems that Ecuador faces today. The Noboa government’s policies in the coming months will be essential in determining whether or not his leadership will set the stage for an alternative model that ensures the rule of law, democratic values, and fundamental rights for a secure future. 

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