U.S. Economic Downturn May Change Remittance Equation



The U.S. economy is harmed by substantial amounts of money sent abroad in the form of remittances:  Money that is earned but not spent in the United States. There are about 45 million foreign-born individuals currently living in the U.S. and roughly $150 billion in remittances are sent annually to friends and families abroad, the majority from the foreign-born.

President Trump has repeatedly criticized the economic impact of remittances. Remittances this year may be significantly curtailed by the outbreak of the coronavirus which is bludgeoning the U.S. economy. These remittances sent to poorer countries are likely to be affected by this pandemic and this could spur a new wave of illegal immigration from countries in Central America’s Northern Triangle. 

The once roaring stock market is now but a whimper, with the Dow Jones Industrial Average losing more than 30 percent of its value in just over a month, closing to within 75 points of President Trump’s inauguration day close.  Unemployment, which was at 3.5 percent in February – a half century low – could rise as high as 20 percent because of the coronavirus impact.

Small businesses, including restaurants, shops, clubs, and movie theaters, are shuttering their windows and closing their doors in order to comply with “social distancing” to contain the coronavirus.  These drastic measures have greatly impacted not only the business owners, but also their workers.  As of last week, the number of workers claiming unemployment because of the coronavirus has jumped to 281,000. 

The majority of these workers are hourly wage earners who depend on their weekly paychecks to survive.  Many of these workers may also be foreign-born workers who send a significant portion of their paychecks to their families and friends in poorer countries. This downturn in the economy is likely to significantly impact how much money is sent abroad in remittances.  Instead of sending money to other countries, foreign-born workers may need to use the once disposable income to pay their rent and put food on the table.

Many developing nations, including those in the Northern Triangle countries of Central America, rely significantly on these remittances. Mexico, the top receiver of remittances from the U.S., received more than $30 billion in 2017. In the Northern Triangle, remittances accounted for nearly 12 percent of the Gross Domestic Product (GDP) in Guatemala to over 20 percent of El Salvador’s GDP.

Decades of mass illegal immigration and lax border enforcement have resulted in ever larger sums of money being sent out of the country. The dependence on these payments had given Mexico and Central American governments no incentive to stop the exodus of their citizens heading to the U.S. to work illegally. 

With the magnitude of illegal border crossers climbing to an all-time high last summer, President Trump told Mexican president Andres Manuel Lopez Obrador that he would impose tariffs on Mexican goods if President Lopez Obrador didn’t regain control of  his country’s southern border. As a result, President Lopez Obrador changed the law to allow those asylum seekers heading to the U.S. to work in Mexico.  Shortly afterwards, Guatemala, Honduras, and El Salvador signed agreements that allowed asylum seekers to seek protections in third safe countries.

Now, the coronavirus may have these Northern Triangle countries reconsidering those agreements and the U.S. could once again see another influx of illegal border crossers at its backdoor. This time, however, the U.S. would not have the same leverage it did last summer, which is one more reason for President Trump to tax remittances and build the wall.

About Author

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Shari Rendall brings to the Federation for American Immigration Reform (FAIR) over 15 years of experience in government relations and grassroots advocacy. In her former position, Shari led the legislation department in coordinating lobbying efforts on Capitol Hill and briefing congressional and administration staff on a wide range of issues. She has also been responsible for grassroots communications and helping state associations devise their legislative strategies. She began her time in D.C. working on Capitol Hill in the office of former Sen. Bob Smith (R-New Hampshire) as a Legislative Aide.

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