Latin America Edge

Research evidence excerpt

Latin America Edge

balanced against the overall state of the US

weight of remittances as a share of GDP, and stricter US economy and labor markets, which have improved this year.

immigration policies. Remittances as a percent of GDP have

Bolivia: The good news in the base effects:been rising for countries across the region: Colombia, Ecua-

dor, Venezuela, and Guatemala, to name a few. They join Back to (still high) single digits

remittance-dependent economies like El Salvador and Hondu- Juan Goldin

ras, where remittances make up between 20-30% of GDP. Social unrest continued to filter through to inflation in June.

The main push factor for emigration has been rising insecuri- Monthly inflation remained above the 2% threshold, driven

ty in the region. This is evident, for example, in Ecuador mainly by very high food inflation. At the same time, the oya

where remittances have spiked since 2022 when the crime sit- inflation rate continued to trend lower on favorable base

uation deteriorated. The durability of this growth is clearly at effects, returning to (still high) single digits for the first time

odds with the Trump administration’s stricter border policies. since December 2024. The recent FX market unification and

Remittances’ real weight is rising in Paraguay, but with greater FX flexibility could add inflationary pressures in com-

migrant workers going to Argentina and Spain, rather than the ing months, but the absence of overshooting one week after

US. Some of this could reflect a healthier, more diversified the regime change is a constructive signal. Core inflation

Argentine economy. With the lifting of capital controls in pressures remain subdued, likely reflecting weak domestic