How Are Remittances Being Affected by COVID-19?

How Are Remittances Being Affected by COVID-19?

Remittances are cash transfers sent by migrants, usually to family members in their country of origin. International remittances can also make up part of the regular income of some people, for example, those who perform cross-border work, such as seasonal workers who tend crops in neighbouring countries. According to UNDESA, migrants send an average of 15% of their earnings back home. Remittances often represent up to 60% of family income.

Projections

In 2019, remittances worldwide accounted for a flow of $706 billion, most of it ($554 billion) to low- and middle-income countries, setting a new record, the World Bank said. However, they also project that the flow of remittances in 2020 will be affected by the economic impact of the pandemic, falling 19.7% globally, and 19.3% for Latin America and the Caribbean. The IOM estimates those most affected will be those working in the catering, construction, manufacturing and hospitality industries, which are traditionally performed by migrants in North America and Europe.

Reality

Despite these projections, some countries continued to see a rise in remittances, at least during the first two months of the year. As time passes, a decline in remittances is being observed.

Guatemala, for example, reported an increase in remittances during the months of January and February, compared to the previous year. While a drop was noted in March, April and May 2020 compared to 2019, more remittances were reported in May 2020 than in May 2018. Moreover, the balance up to May 2020 shows a decline of 3% compared to the previous year.

In Mexico remittances practically doubled during March 2020, the month in which the pandemic was declared, in comparison with the previous month. This represented the greatest monthly increase in remittances since 1995, as well as the highest ever income received by recipient families from remittances, with $378 USD. Some economists attribute this increase to a fear held by migrants that their incomes would be reduced in destination countries, causing them to send savings to their families.

In other countries, however, the predictions have come true and a decrease in the receipt of remittances has occurred. Such is the case of Honduras, which between January and March decreased by 1.1% from the previous year, apparently as a result of a loss of income in the destination countries due to the outbreak of COVID-19, especially the United States. This decrease in remittances intensifies as the months pass: between March and April 2020, the country reported 43% less reserves compared to 2019.

A similar case is found in El Salvador, where a 9.8% drop in remittance between January and April 2020 was reported, compared to the previous year. The vast majority of remittances in this country (95.4%) come from the United States, one of the places hardest hit by the pandemic. It is expected that with the gradual opening of states, remittances will be strengthened.

Reducing the cost of sending remittances is necessary to help alleviate this situation, in line with the Sustainable Development Goals, specifically Goal 10 target 10.c, which aims to reduce the transaction costs of migrant remittances to less than 3%. One factor that can offset remittance fees (which on average, entail a sending fee of 6.79%, which is well above the 3% fee suggested in the SDGs) is a decrease in the value of the currencies of recipient countries, which increases the value of what migrants send home.

Factors

As mentioned above, the main factor in the reduction of remittances to Central America is probably due to the reduction in income from migrants in the United States due to COVID-19. However, there are other factors associated with the pandemic that must also be taken into account, such as:

  • Vulnerability in health: migrants are required to be in good health to be able to keep working. However, 20% of regular migrants in the US do not have health insurance. The figure increases if they are irregular migrants, and that’s just one example.
  • Economic recession: employment and remittances will be hit hard, as the effects of the pandemic-induced recession are felt. An estimated 595,000 migrant workers could be affected. According to ILO, the pandemic will restrict the ability of migrants to travel to work in their host countries and reduce their income, as well as their capacity to return to their families.
  • Exclusion of people from crisis response systems, leaves them more vulnerable to global crises.

In a distant country, Erick daydreams - #MigrantsDay

In a distant country, Erick daydreams - #MigrantsDay
Categoria: Return and Reintegration
Autor: Laura Manzi

Story based on the testimony of Erick Galeas, a returnee.

The outbound journey

The heat was suffocating, as if the breaths of fresh air had forgotten that point in the world, where an immense dryness permeated every corner. The ground burned, the sun gave no truce. And this was no small matter: Erick hated the heat, which only made him feel tired and weak.

On those long days with his skin so exposed to the sun, he would try to find some place in the shade to relax for a little while, alone with his thoughts. It may seem absurd, but at that moment, instead of worrying and being overcome by fear and agitation due to the long-awaited trip, the only thing he could think of was that sweater that he intended to buy once arrived in the United States. He wanted to live in a cold place, this was clear to him, to buy a lot of coats and scarves, and to have frozen hands. Wasn't that part of the American dream too? To be able to escape that dryness and have a closet full of sweaters?

The city of Tijuana, in Mexico, served as the setting for Erick's mental wanderings. It had been also his temporary residence for almost a month. Residence, not home. Erick had been living far away from home for nine months, since he left Honduras and began his journey: one day in Guatemala, one month in Chiapas, six months in Veracruz, then Ciudad Juárez and now there, Tijuana. Nine long months treasuring the desire to be able to find better economic opportunities and support his family that he left behind, which was enthusiastic about the idea of being able to receive some remittances.

To fight for his wish, Erick had to pay for his trip by working, doing whatever job he could find, often up to sixteen hours a day for a paltry salary. But that was not a time to be discouraged, because the next day Erick was going to cross the Mexican border into the United States, after having paid 7 thousand dollars  to a smuggler who promised to finally take him to his destination. This is how Erick's last trip to the north began: early in the morning, on any given Tuesday.

You may have noticed that Erick's imagination led him to daydreaming very often, and at the beginning of his journey, after months of malnutrition, he was wondering what his first meal in the US would have tasted like. Surely it would have been the most delicious meal of the last nine months, a meal that tastes of success ... And then wham!, his reverie was suddenly interrupted. An immigration police officer instantly nullified all of Erick's efforts, who was arrested shortly after. But that was not the end of his journey; little did he know that he still had six months to spend in detention: first in California, then in Arizona, Ohio, Louisiana, and Michigan. In his fantasy there were no police officers or detainees; however, this was the only image that Erick could capture from the United States.

How angry he felt when the comments of people who said "it is easy to get to the United States" and "it is a matter of one, maximum two weeks" came to mind. The lack of truthful and adequate information had been an accomplice to his misadventure. Erick was tired, disappointed, and alone. He was also afraid, because in the detention centers there were not only migrants seeking a better life, but also some common criminals who intimidated others, exacerbating their feelings of discomfort. For Erick, the only chance for peace was those few minutes of calls that he could share with his family. He told them that he was afraid that the US authorities would deport him to Honduras, and on the 175th day of his arrest, that was precisely what happened.

The return journey 

A bittersweet taste marked Erick's return. Not being able to fulfill his long-awaited American dream made him feel frustrated, almost ashamed and humiliated. His overwhelming sense of failure disappeared for a moment when, after almost a year and a half, he could finally hug his son. "Children grow up so fast," Erick thought. But the little boy was not the only one who had grown up in all that time; Erick had also gone through an enormous process of personal growth, and he had acquired an incredible strength.

Oh, and there was also the Honduran food. That really made his return happy!

It was not easy, it was not quick, but after a long path, on a day like today we can imagine Erick dealing with his daily tasks at his handicraft company in Honduras. His small family-run atelier became a company that sells its products nationwide: souvenir-type crafts that include a large sample of boats, helicopters and airplanes, all made of wood. It is a business that allows him and his family to live with better economic conditions than when Erick decided to venture to the United States.

His work activity was also able to flourish thanks to the help of the IOM (International Organization for Migration), which provided him with the necessary machinery for his work, and also to the CASM (Mennonite Social Action Commission), whose course on entrepreneurship strengthened Erick's management skills. The feeling of frustration that he experienced when he returned to Honduras has been transformed step by step into a feeling of satisfaction and happiness a he saw his business growing and gained greater confidence in himself, in his talent and ability. The training courses and the support provided helped him through a difficult process of return and reintegration, and empowered the young migrant on his return home.

Erick was able to build his economic subsistence and his professional fulfillment in Honduras, and among so many complex and unfortunate stories, this is a story with a happy ending. Even so, from time to time, he cannot help but daydream, thinking about what it would be like to travel to the United States again, this time legally, and stay there, even just for one day: to eat at a different restaurant and buy a thick winter sweater.