Coronavirus dashes remittances to Latin America. ‘We will see more famine as a result’

·7 min read

Since the late 1980s, when she left her native Honduras and moved to Miami, Diana Ventura has regularly sent some of the money she earned cleaning houses to relatives back home.

“Ever since I got here, I’ve always done what I could to take care of my family,” she said.

Those payments, which Ventura made every month thanks in part to contributions from her brother, a maintenance man, had recently reached the $400 mark. All of the money went to the siblings’ mother, who is battling glaucoma.

But the sudden arrival of COVID-19 has scrambled the siblings’ decades-long habit, forcing them to drastically pare down payments to Honduras as they deal with job losses in Miami.

“My brother and I have practically stopped working,” said Ventura. “It’s not that we’ve been left with nothing, but it’s only been with the little savings that we have that we’ve been able to send some money home. But we just can’t send the same amount of money that we used to. We’ve had to cut back on everything.”

At the moment, Ventura can only send about $150 to Honduras every month, which has prompted her mother to cut down on costs: A health aide who visited her has been dismissed; her home’s landline has been disconnected.

“At least the money is still enough to fill her prescriptions,” Ventura said.

Jose’s family has also had to adjust.

An immigrant from Guatemala who arrived in Miami eight years ago, Jose — who asked that his last name not be used due to his immigration status — used to send $150 to $200 home every couple of weeks. Since the shelter-in-place order, the handyman has found it difficult to get gigs painting houses or doing odd jobs. As a result, he has only been able to send a fraction of that amount.

The change has forced his mother to cut back on some of the medicine and painkillers used to manage her diabetes.

“I also imagine that she’s eating less than before,” said Jose.

REMITTANCES TAKE A NOSE DIVE

As the spread of the coronavirus paralyzes economic activity in South Florida and across other U.S. regions with significant Latin American populations, families south of the border are starting to feel a ripple effect. Cash influxes from remittances have dwindled or, in some cases, ground to a halt.

According to the Miami-based Havana Consulting Group (HCG), Latin America is on track for a 21 percent drop in remittances, down from $98 billion last year to $77 billion in 2020.

“That’s the optimistic scenario,” said HCG president Emilio Morales, who noted that upwards of 75 percent of the remittances to Latin America come from the U.S.

Accounting for the sharp drop is the fact that U.S. Latinos — who are over-represented in the workforce of restaurants, hotels, and other vulnerable service-sector industries — are among the workers hardest hit by coronavirus-related job losses.

“The downturn will be considerable,” Morales said. “And the longer this drags on, the more will the immigrant population’s savings get depleted. There will come a time where they won’t be able to send anything home.”

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Those who are undocumented find themselves in an even more precarious position, since they are ineligible for coronavirus relief money and cannot apply for unemployment benefits.

“Folks still have their bills to pay here, so helping relatives back home is becoming a smaller priority,” Morales said. “They just can’t afford it anymore.”

Across Latin America and the rest of the developing world, the countries most reliant on remittances for financial stability will be the most exposed to the harmful effects of the pandemic.

In El Salvador and Honduras, remittances account for nearly 20% of the gross domestic product, according to figures from the Inter-American Dialogue. In Haiti, the most remittance-dependent nation in the Western Hemisphere, that number is around 30%.

“You would be hard pressed to find a Haitian immigrant here who doesn’t send money to Haiti,” said Marleine Bastien, executive director of the Family Action Network Movement, a local Haitian advocacy group. “You can feel the level of anxiety. People are having to fight for their survival here and they also have to be concerned about their families back home.”

According to Bastien, the impact of remittance curtailment “will be unimaginable.”

“I think people are rightfully concerned that we will see more famine as a result.”

Also among the countries hardest hit by plunging remittance flows will be those that have imposed strict lockdowns to curb the spread of the virus.

That’s because people in developing countries depend on physical labor outside the home to feed their families. In a time of mandated confinement, that makes them even more dependent on money transfers from abroad.

“A 20% decrease in remittances is going to be a huge setback, especially for the countries that have been enforcing measures to mitigate the pandemic through social distancing,” said Dr. Michael Touchton, a political scientist at the University of Miami whose research focuses on Latin America.

“So it might not be as bad in places like Nicaragua where they haven’t shut down work. They’re not enforcing distancing measures compared to a country like El Salvador next door, where they are in lockdown,” and which also depends heavily on remittances, he said. “No economy at home and no economy from Salvadorans in the U.S. sending back remittances means this is going to be catastrophic.”

THE SPECIAL CASE OF CUBA

Since President Barack Obama loosened restrictions on remittances and travel to Cuba, the amount sent home by the Cuban diaspora has steadily increased. It is now the island’s top source of income.

In 2019, remittances to Cuba exceeded $3.7 billion, with around 87% coming from Miami, according to Morales.

But the pandemic could imperil Cuba’s remittances-based income more than in other countries, in part because much of the money flowed into the island through passenger flights that have now been stopped.

As Morales explained, 98 percent of remittances directed to Central American countries are sent via formal channels such as money transfer services. “But that’s not the case in Cuba,” he noted. “In Cuba, between 45 and 50% of remittances are sent via informal channels, meaning passengers who travel to Cuba with the money in their pockets.”

In addition to the cash-based remittances, travelers would also take “six, seven, or eight bags full of merchandise with them,” Morales added. “But now, with the new measures restricting air travel, that flow of money and goods completely stops. And that’s a big problem for Cuba.”

THE FUTURE OF REMITTANCES

Experts believe the pandemic could change how Latin American immigrants send money back home, turning folks away from in-person, cash-based remittance services and toward digital tools.

The digital transition “has been slower in Latin America than in other regions,” said Touchton. “But because of the pandemic, digital options are likely to be adopted far more quickly and far more widely than the previous trajectory would have us believe.”

What will catalyze the change, Touchton said, is restricted access to brick-and-mortar money transfer agencies caused by the pandemic. ”The standard measure of retrieving remittances might no longer be possible in some countries,” he said.

Some companies that facilitate digital remittances to Latin America are already witnessing a surge in demand.

“We are seeing an acceleration of behavioral change from our users. Mobile money and other non-cash payment options have been growing in popularity for some time now, but the impact of coronavirus seems to be increasing the proportion of customers opting for 100% digital options,” said Erick Schneider, regional head for Latin America and the Caribbean at WorldRemit, a global digital money transfer service.

“In some countries we have seen a 100% swing to digital payout methods, bank accounts, mobile money or airtime top up,” he added.

When it comes to the overall health of the remittances market, Morales expects a slow recovery of two years or more.

The road ahead “will be very complicated,” he said.

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