Monetary transfers sent by migrants to their countries of origin, are a crucial source of income for Colombia and other Latin American and Caribbean (LAC) countries. In Colombia, they come mainly from the United States and Spain (42% of the total) and, in 2024, they accounted for close to 3% of GDP, reflecting their rapid recent growth, since a decade ago they represented only 1.1% of GDP. In fact, so far this year through September, data indicate that remittances in Colombia have grown at an annual rate of 17.2%, the highest in Latino-American region. The recent dynamism is the result of the strong emigration observed during 2022 and 2023, as well as the appreciation of the Colombian peso during 2023, since it was necessary to increase remittances to maintain the level of household spending.
The characteristics and profiles of transfer recipients tend to be close family members, including women and informal workers in vulnerable conditions. They are mainly used to cover living expenses, especially in the first years of stay of immigrants from abroad. They also contribute to raising the standard of living of recipient families, avoiding situations of poverty and helping to sustain local economies.
The re-election of Donald Trump poses significant challenges for Colombia and other remittance-receiving LAC countries. Among the main risks are: i) mass deportation, which could reduce the number of working migrants in the US, limiting the ability to send money; and ii) taxes on remittances as part of anti-immigrant policies, which would make remittances more expensive.
The remittance challenge is not unique to Colombia. Ecuador leads as the main recipient in Latam region, accounting for 4.6% of GDP in 2023, followed by Mexico with 3.7% of GDP (Figure 1). These countries, like Colombia, face risks in the face of more restrictive policies in the U.S., as they are highly dependent on these flows.
Latin America faces an uncertain outlook. If Trump’s proposed policies materialize, it is estimated that the growth of remittances could slow down, negatively affecting consumption in these regions. Likewise, the quality of life of the families that depend on this income could be affected, particularly that of women and informal workers, who are the main beneficiaries of this income.
In short, transfers are a key factor in supplementing the income of many households in Colombia and the rest of Latin America, as well as an important source of foreign exchange earnings. However, the political context in the US adds uncertainty to their future growth. What happens in the coming months with immigration policies in the US will be critical for this and, therefore, for the financial stability of many families in the country.
