El Economista recently published an article based on the findings of a report entitled ‘The Future of Central America: Challenges for a Sustainable Development’. The report was produced by a collaboration between the Inter-American Development Bank (IDB) and the Latin American Centre for Competition and Sustainable Development (CLACDS, by its Spanish initials) of the INCAE Business School. Short extracts from the article are translated below.
Key words: remittances; migration; Northern Triangle countries; Temporary Protected Status (TPS);
The recent hardening of the United States’ immigration policies is putting at risk a significant ‘escape valve’ for the economies of the Northern Triangle of Central America: namely remittances.
“An important factor for these societies [El Salvador, Honduras and Guatemala] is the fact that there is an escape valve for social and demographic problems, and a source of income,” said the Dean of the INCAE Business School, Alberto Trejos, to El Economista, regarding migration and remittances.
The report points out that there are at least 3 million migrants from the Northern Triangle in the United States and that their remittances represent 20 per cent of the Gross Domestic Product (GDP) of El Salvador and Honduras and 12 per cent of the GDP of Guatemala. Our societies in the region
According to the report, in 2017 Salvadoran migrants in the United States accounted for 23 per cent of total population of El Salvador, and the respective proportions of Honduras and Guatemala were 8 per cent and 6 per cent.
The report warns that the hardening of immigration policies in the United States could have a substantial impact on remittances and, through them, on the economies of El Salvador, Honduras and Guatemala.
The report’s estimates indicate that remittances could decline by 7.6 per cent per annum due to recent and proposed immigration policies changes and that the elimination of Temporary Protected Status (TPS) for Honduran and Salvadoran citizens [illegally residing in the USA] could imply a further reduction in remittances of 6 per cent per annum in the medium term. It also estimates that a further 7 per cent of migrants who currently reside in the USA could decide to return to their country of origin.
Those migrants would return with savings of around 3 per cent of their country’s GDP which would generate a temporary positive effect which would be converted into an additional demand for jobs. For these jobs to be filled would require that the economies of the Northern Triangle countries would have to grow by one percentage point more than is expected or predicted.
For the INCAE Dean, remittances are an important escape valve, but the current remarkable migration has negative consequences due to the flight of humans who are at their most productive ages. “We have to stop thinking of the phenomenal migration from the perspective of remittances, even though it appears to represent the inflow of money. But we have to admit that this money flows in because we cannot provide alternative prospects to young people so that they might stay.”
“At the same time that this money flows in, the productive capacity of these people disappears. Society loses the income that these people would have generated, we lose the contributions of the skills of these migrants and that leaves us with a society that is demographically and economically different.”
For the INCAE Dean, the conditions which prompt people to migrate “are not a good thing,” and although migration may generate some positive effects on the economy, it cannot be called a good thing. Trejos warned that a mass return of migrants at this time would necessitate “a very disruptive adjustment.”
El Economista: eleconomista.net
INCAE: www.incae.edu