Remittances will continue to be the key driver for several Central American economies despite a major US-led investment push, political analyst Eduardo Núñez told BNamericas.
This week the White House announced that the North triangle – Guatemala, Honduras, and El Salvador – would receive US$950mn in investments as part of efforts to curb migration to the US.
The investment comes from the Partnership for Central America, which is led by US vice president Kamala Harris. Launched in 2021, it aims to address the root causes of migration by creating economic opportunities in Central America.
There are several millions of migrants from Guatemala, Honduras and El Salvador that are living either legally or illegally in the US, sending home billions of dollars each year to their families, said Núñez.
That money represents between 18% and 26% of those countries’ GDP, making it “their main economic activity,” he said.
Through migration, the large amount of remittances has generated a dependency between the US and Central America that is not possible to break, according to Núñez.
According to central bank figures, 2022 remittances to Guatemala, Honduras and El Salvador amounted to US$18bn, 8.7bn and 7.7bn, respectively.
After an increase of 9.3% last year, the World Bank sees remittances to Latin America and the Caribbean (LAC) growing 4.7% in 2023 due to the expected economic slowdown in the US, where the great majority of LAC migrants live.
The Central American economies are among the most dependent on remittances in LAC, and they could take a hit this year if there is a major reduction in money transfers from migrants.
Close to 50 companies from the US and other countries are participating in the Partnership for Central America, which has so far announced investments worth US$4.2bn.
