Remittances: a macroeconomic drug

Remittances: a macroeconomic drug

SurEconomics staff, August 2026

If remittances were a publicly traded company, they would be the largest and most impregnable multinational in Latin America. In 2025, Latin American migrants sent home an astronomical $162 billion to their countries of origin.

To put that figure in perspective: the remittances received in Latin America are equivalent to building three Panama Canals every year, or to quadrupling the entire national budget of Costa Rica. In countries such as El Salvador, Honduras and Guatemala, these transfers account for between 23% and 28% of national gross domestic product (GDP).

What is striking is not only the flow of dollars but where it goes: 88% of that money is spent within 15 days on food, electricity bills and medicine. Only 4% becomes working capital or investment capital to open a shop or a small business, or to fund a farming venture.

The above clearly shows that remittances in the region are used for the final consumption of a survival economy and contribute little to the receiving country’s private savings and investment, tax revenue and public spending, and even less to the trade balance and export income typical of emerging or more consolidated economies.

The injection of fresh money that remittances represent in our region sustains the consumption of 40 million people and prevents social unrest in the short term, but it works as a “macroeconomic drug”: governments grow complacent, postpone reforms meant to create local jobs and end up dependent on the systematic expulsion of their own people, who migrate to countries with better economies in search of better living conditions.

Sources

·       World Bank. Migration and Development: Review of global remittances, 2025.

·       Inter-American Dialogue. Remittances to Latin America and the Caribbean in 2025.

·       BBC Mundo. “The weight of migrant money in Latin American economies,” June 22, 2026.