Remittances, Migration & the Trump Effect: The Press Asks Questions

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“It is the migrant, most of the time forgotten, who is sustaining the economy”
Diario La Hora – Guatemala – Jan 20, 2017

Hugo Cuevas Mohr, director of IMTC (International Money Transfer Conferences), has worked for years advising bank and non-bank institutions on international money transfers, payments and remittances. In preparation for the IMTC regional forum that will be held in Antigua, Guatemala in March 8-10, he visited the country to talk about migration and remittances, in a moment where the appointment of Donald Trump as President of the United States has brought the subject to the foreground.

Cuevas-Mohr warned that countries in the Central American region and Mexico should not wait to take preventive measures that could protect migrants should US authorities push for legal changes that affect them.

The issue that worries migrants today is Trump’s anti-immigrant campaign, do you think he can make his campaign promises come true?

Everything that was said in the presidential campaign was to gain votes, but examining who he has chosen to the new administration is very worrisome, because these are people who have been working on anti-immigrant issues for 20 years, as well as taxing remittances, among others.

There is one single state in the United States that taxes remittances: one percent (1%). It gives ten million to eleven million a year to the state. If you pay that tax and you are legal, you make your tax return and you can subtract that sum from your taxes. But if you are illegal and have no income tax to declare you lose this. 96 percent has not been claimed and only 4 percent has been. This does not mean that 96 percent is from illegal migrants, but probably that most of the legal ones consider that the 1 percent is probably too small to claim or they ignore that possibility.

I do believe that it is very possible that at the state level, not so much at the federal level, taxes might be approved in some states. If the percentage of the tax is 1 percent we are not talking about large amount per remittance,  so it may not affect customer behavior.

If the tax is more, 3 or 4 percent, that will be extremely worrisome. Not only because this implies an increase in the cost of the remittances which will impact the poorest sectors considerably; also because with the tax in place some people might begin to change their sending habits, for example not using formal channels, but by using someone who travels and they might send the money with him/her. And people might start to take risks with money or, even more worrisome, they could use illegal methods to send. Traveling with money is dangerous because of the risk it involves.

In the end, it is sad because the migrants will be the ones that will end up paying, is like taxing the poorest of the poor. As a society is a bit ridiculous to tax the poor, but with all the campaign speeches that we have heard, I believe that it is possible that taxes might appear in more and more states.

Unfortunately, anti-migration policies are going to be brought to the table. I think deportations are going to increase, although the large deportations of illegals, as it was promised, is very difficult that it will happen.

This is a time of uncertainty, yes. Let’s see what happens in the months to come. Enacting laws in the United States is very complicated, not only because they have to go through the House, then the Senate, but because regulating an approved law is also very complex and there will be legal challenges, etc.

Would the total blockage of remittances, by the US government, be possible?

It is impossible I think. There are no real legal mechanisms to achieve this and in addition, everyone knows, because it has already happened – it has happened in Venezuela for example, that if you have your mother, and she needs money, you are going to get money to her in any way possible. Remittances are like water: stop the flow one way, it will start to flow another way. You might lower the amounts sent if you put a lot of roadblocks, but stopping them all together is not going to happen.

In addition, many economists have explained the importance of these migrants to the economy of the sending countries…who else if not the immigrants will collect vegetables in the United States? Just to mention something. Americans are not going to do it. You can formalize temporary agricultural workers, that can be done.

Was there a change in the behavior of remittances from the announcement of Trump’s victory?

Yes, most people believe that there has been. What happened is that, first, most migrants believed that he was not going to win. Most thought it was crazy that a person saying so many outrageous things was going to win, and he won. That coincided with December that is the biggest month for remittances, especially for this region, for Christmas & New Year’s.

But yes, it was a November and a December where the levels of remittances were greater than it was anticipated or expected. But I think it is a given that the increase in remittances – by the arrival of Trump to the Presidency, will continue for a few months. If I am illegal in the US and I have some savings, and I am afraid that suddenly I could be deported, will I buy a house? No, I don’t think I will. I would probably send the money to my country because at least there, I will have my money safe and if they deport me, I might lose it, or they would confiscate it. The fear is there and anxiety is growing.

So, it is my belief, but I can be wrong, that there’s going to be a tendency for migrants to send more money because they don’t know what’s going to happen. I think January might also be larger than usual, and so on, but that upward trend will not hold. We are not talking about large sums per person, but who knows if illegal migrants might start selling their things to return to their countries, or move to Canada; that can happen, but only if things become very critical in the US. I do not think It will get to that, at least not in a near term. But it is too soon to tell.

The fear is being felt, the Hispanic community in the US is worried, the money transfer agents are listening to their clients questions, the newspapers that target migrant communities, the radio stations, are talking about it. That shows how much anxiety is being felt in every migrant community in the US.  Fear is going around and it is fear that makes people change habits…

Is there any way that countries can prepare for these changes in US migration policies?

I do not think countries should wait. For example, there was a meeting of the consulates of Guatemala, El Salvador and Honduras in the United States. When I read the news I was very happy because we have to prepare, we have to work together. How can we protect our migrants if they are at risk? Yes it is important that we begin to take measures, to plan; what will happen if deportations increase? What can be done? How to support returning migrants? How to handle the different situations, like broken families, children left behind? Institutions, politicians and non-governmental organizations working with migrants need to work together, come up with ideas, legal help, solidarity, public awareness, etc.

In the United States organizations are already working on how to support migrant families, how to support families if they deport the grow-ups, how to protect minors. Legal support for migrants will be so important and very few receive the much-needed help to support their individual cases. It is especially important for people of limited resources, with little schooling, who often do not understand the laws and therefore suffer great abuse. So there is a lot to do, we can not expect things to just happen; planning is needed and it is needed now.

What characterizes remittances from the Central American region?

Let’s talk about Guatemala. It is very interesting how each country has its own characteristics, even in countries that live next to each other. In Guatemala, for example, 70% of remittances are received by women. Also, the fact that 1 in 10 Guatemalans receive remittances. There are many particularities.

Remittances in Guatemala are received by the poorest sectors of the population; it moves them from a situation of extreme poverty to what we could call “average poverty level”. It is not that these families become rich. One see many cases where families invest a little more in construction, fixing their homes and also spend a little more in education, health and, of course, consumer spending, buying goods.

And here in Guatemala – and also in all of Central America, although the amount of remittances received in 2016 was more than 7 billion dollars, what each family receives is relatively little;  we are talking at averages of 150 dollars a month per family. $161 to be exact on a recent study published by FOMIN. That’s a little money, what happens is that Guatemala has millions of migrants.

There are regions in every country that receive much more than others. Here in Guatemala the largest number of remittances are received in Guatemala City, because it is the region with the  largest population;  but in reality, in departments like Jutiapa, San Marcos or Huehuetenango, the percentage of people receiving remittances is much higher, close to 20% of the population in some places.

Note: For more information on Guatemalan Remittances check the recent work by Rebecca Rouse &  Lukas Keller for FOMIN

How has the flow of remittances changed in recent years?

Remittances have been rising since the financial crisis of 2008-2009, which affected remittances in almost all countries of the world. Now, the crisis did not hurt remittances as it was anticipated, because, although construction in the United States for example, plummeted –  and migrants are the ones working in that sector, migrants had to send money to their relatives and they had to subsist. So they looked for other jobs or moved to other states where there was work. They couldn’t collect unemployment like Americans or Europeans, and kept the economy moving. That is, although the economy declined in most developed countries, remittances did not declined as much. Remittances are resilient.

Year after year, in the last 10 years, the growth of remittances to Guatemala has been about 7 or 8 percent, on average. That is greater than most countries in the region.

It is important to note that people migrate mostly  for economic reasons, obviously, but also migrate by situations of violence, by natural disasters, and this varies in each country. In Guatemala, there has not been a natural catastrophe in recent years such as in Haiti, so migration is mostly economic. Violence, as a factor that influences migration, exists but not as it did about 20 years ago.

Another change is the increase in Guatemalan indigenous migration in recent years. There are places in Florida where the percentage of Guatemalan natives in farm work is enormous. Many do not speak Spanish, meaning that their social integration process is much more complicated. This is a very particular element of Guatemala compared to other countries. Indigenous migration in Guatemala accounts for more than 30%.

In addition to the families directly benefited by remittances, how does the economy of the receiving countries benefit?

In the end, the whole society benefits. Because it benefits from consumption, housing, development. So, no matter what social class we are in, we all benefit from it: the bankers, the builders, the importers.

Dollars entering a country, like Guatemala that receives 7 billion dollars in a year, increase the country’s reserves and benefit importers who have a cheaper dollar. Likewise, banks and companies that render their services to migrants prosper from remittances, increasing their footprint in the country and by in large benefitting the whole population.

Remittances improve housing in every country. Migrant families, one of the first things they do, is invest in their homes. And consumption, sometimes criticized, also drives the economy.

All of these aspects have not yet entered the minds of the society as a whole, including the elite and the rulers. That migrant, often forgotten, is the one who is financing the entire economy in some countries, especially in Central America.

Journalistic coverage at the launch of the conference and the visit of Hugo Cuevas-Mohr and Salvador Velázquez to Guatemala:

  • Remittance tax would change the habits to send money | el Periódico de Guatemala
  • What will happen to the Guatemalan remittances with the arrival of Trump? | Soy502 Roberto Caubilla
  • Remittances to Central America will continue to grow during the first semester – El Economista.
  • Remittances sent by Guatemalans from the United States could be taxed | La Noticia en Guatemala / The Truth without Owner
  • Remittances revenue will continue to rise – Diario de Centro América
  • Guatemala to host first Conference on Remittances and Migration – reportajede.news
  • Cental America: Remittances will continue to grow during the first semester – diaadianews.com
  • Radio Interview: Vamos Guate 98.1 FM

HUGO CUEVAS-MOHR
Hugo Cuevas-Mohr has more than 20 years of experience in the money transfer and remittance market.
For the past 10 years he has been a consultant to money transfer companies and banks in Latin America, USA, Spain and the UK. He develops conferences and seminars on topics related to the transfer of money internationally, migration, remittances, financial inclusion, as well as organizing the IMTC conferences.