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.

Extortion is Causing the Expulsion of Migrants from the Northern Triangle of Central America

Extortion is Causing the Expulsion of Migrants from the Northern Triangle of Central America
Categoria: Migrant Protection and Assistance
Autor: Guest Contributor

In cases of forced displacement, extortion is often mentioned as one of the main causes. However, extortion is located within a cycle of violence, such sexual violence, murder, etc., and it is difficult to identify a single incident of extortion as the sole reason for leaving a country.

Although its definition varies depending on national legislation, extortion can be understood as the use of threats, intimidation and other acts of violence to obtain actions or goods from another person against their will, as defined by the Latin American and Caribbean Network of Environmental Funds (REDLAC), in a special bulletin dedicated to this issue and upon which this post is based.

In the context of migration, kidnapping and extortion go hand-in-hand, as smugglers often extort money from migrants by threatening to kidnap their relatives. Extortion can also be committed in the other direction: relatives of migrants who have already arrived in another country are extorted by smugglers, demanding money from them so as not to harm the family member who has already migrated. This can often lead to persecution in communities of origin and destination.

In Guatemala, Honduras and El Salvador, the serious issue of personal insecurity fuelled by drug trafficking and corruption has marked the region as one of the most violent on the planet, according to Amnesty International. In this context, extortion schemes demanding payments from local markets and small businesses are commonplace in gang-controlled territories. However, depending on the country, there can also be extortion demands  placed on homes, such as in Guatemala, where this accounts for 55% of extortion complaints.

There is also a difference between the type and impact of extortion experienced by men, women, children and the LGBTIQ+ population. In this sense, when women are extorted for money, threats are often combined with the intimidating possibility of sexual violence. According to the REDLAC bulletin, the bodies of women, adolescents, and girls are treated as territory for revenge and control while children are being increasingly recruited as rent collectors, among other functions.

Migrants are often also extorted by people who are not part of criminal groups but who take advantage of their vulnerable situation to turn a profit, such as locals who demand payment to cross private land rather than using routes with criminal gangs, or transporters who demand money from irregular migrants in exchange for not reporting them to immigration authorities. The same situation has been reported with employers who, on pay-day, threaten to report migrant workers for an irregular migrant status.

There are currently no figures on the number of people displaced or forced to migrate due to extortion in northern Central America, as this is part of a generalised climate of violence; however, some organisations locate this crime as one of the main reasons for migration from areas or even from the country.

 

Extortion during the pandemic

In the bulletin of the Network of Latin American and Caribbean Environmental Funds (REDLAC) which examines extortion as a trigger for internal displacement and forced migration in northern Central America and Mexico, some relevant points were also made about how extortion has adapted to the context of COVID-19:

  • In El Salvador, COVID-19 has reduced the income of gangs, but they have not lost territorial control. Some gangs have established restrictions, such as allowing one individual per family to make food purchases, to reduce the risk that a gang member may become ill and not be able to access medical care.
  • In Honduras, the paralysis of the transportation and informal trade sectors, generally common sectors for extortion, has registered a decrease in cases of extortion due to the pandemic. However, there have been reports of threats of retroactive charges once commerce resumes, house-to-house tariffs, and road ‘tolls’, and scams executed by gangs. Food distributors are frequent victims of extortion when entering communities.
  • In Guatemala, extortion has not stopped either, although at the beginning of the pandemic some maras (gangs) granted ‘pardons’ in their communities. However, national agencies predict that when the restrictive measures end, there will be an increase in other crimes and that extortion will return as a greater threat.
  • Mobility restrictions increase the risk of people being trapped in violent environments, making it difficult to seek support in other territories and countries. Despite this, many people seek and will continue to seek irregular migration options, despite the dangers of the pandemic, in order to leave the high-violence, low-income contexts in which they live.