Remittances to CenAm, Mexico show mixed signals

Growth in remittances to Central America, while still positive in the first five months of 2018, has slowed somewhat from the year before in El Salvador, Honduras and Guatemala, amid a strong US labor market and concerns among migrants working in the US over increasingly aggressive anti-migration policies.

In a statement, El Salvador's central bank (BCR) said Thursday, "The most recent results on family remittances from El Salvador, Honduras and Guatemala are showing a similar trend, in all three cases the rates are some points over 8% but are somewhat lower compared to those observed last year."

The five-month annual growth rates in El Salvador, Honduras and Guatemala - at 8.9%, 9% and 8.1%, respectively - were lower than the overall growth rate in remittances for the countries from 2016 to 2017, coming in at 9.7%, 12% and 14.3%, respectively.

The BCR said January-May remittances to the country hit US$2.23bn, with May remittances alone coming to US$494mn (+7.1% year-on-year).

Of the five-month total, 93.4% of the remittances to El Salvador came from the US, followed by transfers from the EU (0.9%) and Canada (0.9%).

Remittances to Honduras in the first five months 2018 climbed to US$1.97bn. The Honduran central bank reported the May remittances to the country came to US$470mn, a 23% increase over the same month in 2017.

Meanwhile, Guatemala's January-May remittances reached US$3.60bn, according to the country's central bank, with May remittances coming to US$809mn, up 8.2% over May 2017.

The BCR statement added that remittance growth in Mexico and Nicaragua, rather than losing steam, continue to expand, adding, "Mexico has an accumulated growth through April of 9%, and Nicaragua is [the country] with the highest growth rate through [May] at 11.7%."

In a note to investors, Banorte-IXE economist Francisco Flores, suggested future remittance patterns would largely depend on the labor market and US migration policy, adding "It could be argued that family remittances are a saving modality for migrants, so the increase observed in the flow of remittances since 2017 was also explained by the anti-migration policy of the Donald Trump administration."

"This considering that probably Mexican migrant workers continued to discount a greater probability of being deported, which significantly reduced their expectation of permanent income, and consequently increased the desire to save for such workers," added Flores.

Stronger US labor market

Unemployment in the US, the main source of remittances for all three countries, fell to 3.8% in May, down a half point from May 2017, as reported by the Bureau of Labor Statistics (BLS).

A BLS report on foreign-born workers in 2017, released last month, showed that Hispanics accounted for 47.9% of the foreign-born labor force in the US, where the 27.4mn foreign-born persons account for 17.1% of the total labor force.

The unemployment rate for foreign-born persons in the US in 2017 was at 4.1% in 2017, down from 4.3% in 2016, tracking just below the rates for native-born persons, which saw rates fall to 4.4% last year from 5.0% the year before. Unemployment for Hispanic foreign-born persons in the US was at 4.3%, down from 4.7% in 2016.

Hispanic foreign-born full-time workers earned 82.3% as much as their native-born counterparts in 2017, down from 83.5% in 2016.

According to BLS, the foreign-born population "includes legally-admitted immigrants, refugees, temporary residents such as students and temporary workers, and undocumented immigrants. The survey data, however, do not separately identify the numbers of persons in these categories."