Key facts:
In Central America and the Caribbean, the weight of remittances in the economies reaches up to 25%.
Remittances via bitcoin quadrupled in El Salvador in one year.
Remittances sent to Latin American countries from the United States went from USD 100 million per month, between October 2019 and April 2020, to almost USD 400 million per month between April and May 2021, according to figures provided by Chainalysis. Among the reasons that allowed the monthly amounts sent to Latin America to quadruple, was the greater use of bitcoin and other cryptocurrencies to facilitate the sending of remittances.
The central american edition of Forbes magazine, pointed out this Wednesday, February 2, that countries like Venezuela, Argentina, Colombia, Brazil, Chile, Peru and Mexicoare among the economies with the highest adoption of cryptocurrencies for sending remittances in Latin America.
In the latest update on global migration and remittance flows, the World Bank and the company Knomad place total remittance flows to Latin America at USD 103 billion by 2020, with a growth expectation of 4.9% by 2021 and 4% for this year. According to the estimates of that reportthe flow of remittances to Latin American countries in 2021 was USD 108,047 million, while in 2022 that figure would grow to USD 112,369 million.
Advertising
In 2020, Mexico was the only Latin American country that was among the 10 largest recipients of remittances in the worldaccording to a graph from Statista, based on figures from the World Bank.
India received the largest amount of remittances in 2020, about USD 83.1 billion, while Mexico is in third place, with incoming remittance flows of USD 42.9 billion.
Impact of remittances on Latin American economies
The World Bank report offers two aspects of the statistics on remittances that entered the Latin American region in 2020. On the one hand, the following graph shows, on the left, the 10 countries with the largest flows of incoming remittances in the region. .
Mexico has a dominance of 41.65% with respect to the total flow of remittances received in Latin America. Guatemala, the Dominican Republic, Colombia and El Salvador complete the 5 countries that lead the reception of remittances, which cover 73.2% of the Latin American total. The top 10 countries in receipt of remittances represent 92.9% of the total remittances received in Latin America.
The graph on the right (with red bars) shows another important feature: the weight of remittances in the respective national economies of the Central American region. In general, these are small economies, but the proportion of remittances received in relation to gross domestic product (GDP) is very significant. In El Salvador, Honduras, Haiti and Jamaica, for example, the percentage of remittances received in 2020 exceeded 20% of the GDP of the respective countries.
Regarding the cost of sending remittances in the Latin American region, the report indicates that in the fourth quarter of 2020 an average of 5.6% was recorded, but it highlights that in some specific cases that cost rises very noticeably. “For example, the cost of sending money to Cuba exceeds 9%. Sending money from Japan to Brazil is also expensive (11.5%), “says the study.
The use of cryptocurrencies as a facilitator for sending remittances is not reflected in the report, although it can be inferred that the growth of remittances in the region could be related to a greater adoption of these digital assets.
A manager’s version of coinpay.cr interviewed by Forbes about excessive costs and risks in acquiring cryptocurrencies,could be interpreted as motivated by commercial interest and not by profit that they can lend in a process of self-management of sending remittances.
In the case of El Salvador, for example, a Reuters report commented on by CriptoNoticias, stated that, from May 2020 to May 2021, before bitcoin was declared legal tender in that country, the monthly amount of remittances received using bitcoin quadrupled: it went from USD 424,000 to more than 1.7 million dollars.