Report on the Decline in Remittance Flows and Implications for Sustainable Development Goals

Executive Summary

A recent analysis of financial data indicates a significant downturn in remittance flows from the United States to Mexico, reversing an eleven-year growth trend. This decline poses a considerable threat to the achievement of several key Sustainable Development Goals (SDGs), particularly those concerning poverty, economic growth, and inequality. The trend is attributed to deteriorating labor conditions and stringent immigration policies in the U.S., including the potential imposition of new taxes on financial transfers.

Analysis of Current Remittance Trends

Data from Banxico, Mexico’s central bank, reveals a consistent and sharp decrease in remittances, which are a critical source of external financing and support for household incomes.

• Year-on-Year Decline: Remittances have fallen by over 15% compared to the previous year.
• Monthly Figures: The month of June saw a 16% year-on-year decrease, with total inflows of $5.2 billion, marking the third consecutive monthly decline.
• Annual Trajectory: Over the last 12 months, total remittances amounted to nearly $63 billion, a figure lower than those recorded in 2023 and 2024.
• Average Transaction: A minor positive indicator is the rise in the average remittance amount to $409.

Causal Factors and their Relation to SDG 8 and SDG 10

The reduction in remittance flows is linked to several socio-economic and political factors that directly impact the well-being of migrant workers and their ability to contribute to their home economies. These factors undermine progress on SDG 8 (Decent Work and Economic Growth) and SDG 10 (Reduced Inequalities).

1. Deterioration of the U.S. Labor Market: Unstable employment conditions for migrant workers limit their capacity to earn and send money, directly conflicting with the principles of decent work for all under SDG 8.
2. Restrictive Immigration Policies: An atmosphere of fear surrounding deportation and crackdowns discourages migrants from participating fully in the economy and utilizing formal channels for sending remittances. This challenges the targets of SDG 10, which call for facilitating safe, orderly, and regular migration.
3. Proposed Remittance Tax: The introduction of a 1% tax on remittances by the U.S. administration presents a direct barrier to financial flows. This policy is in direct opposition to SDG Target 10.c, which aims to reduce remittance transaction costs to less than 3%.

Impact on the 2030 Agenda for Sustainable Development

The decline in remittances has profound and far-reaching consequences for the advancement of the 2030 Agenda in Mexico and the wider Central American region.

SDG 1: No Poverty

• Remittances are a vital lifeline that lifts families out of poverty. In 2024, these flows constituted nearly 4% of Mexico’s GDP. A reduction in this income directly threatens household financial stability and increases vulnerability to poverty.

SDG 8: Decent Work and Economic Growth

• For many recipient countries, remittances are a major source of national income, fueling local economies. The decline represents a significant economic shock that can stifle growth, investment, and job creation.

SDG 10: Reduced Inequalities

• Remittances are a key mechanism for reducing inequality by transferring wealth to developing nations. The impact is even more pronounced in Central American countries, where remittances account for a substantial portion of GDP:
  • Nicaragua and Honduras: Over 25% of GDP
  • El Salvador: 23.5% of GDP
  • Guatemala: 19.5% of GDP
• A decline in these flows exacerbates both global and national inequalities.

Policy Responses and Regional Considerations

In response to the proposed U.S. tax, the Mexican administration under President Claudia Sheinbaum has announced plans to reimburse nationals for this tax. This policy intervention represents an effort to mitigate the direct financial impact on families and safeguard progress toward SDG 1. The regional dependency on these financial flows underscores the need for international cooperation and policies that support, rather than penalize, the contributions of migrants, in line with SDG 17 (Partnerships for the Goals).

SDGs Addressed in the Article

1. SDG 10: Reduced Inequalities

   • The article focuses on remittances, which are financial flows from migrants in a developed country (U.S.) to developing countries (Mexico, Nicaragua, Honduras, El Salvador, Guatemala). This directly relates to reducing economic inequalities between countries. The discussion on the cost of sending money, specifically the proposed 1% tax, is a central theme of SDG 10.

2. SDG 8: Decent Work and Economic Growth

   • The article highlights the significant contribution of remittances to the national economies of several countries. It states that remittances accounted for “nearly 4% of its gross domestic product” in Mexico and over 20% in some Central American nations. A drop in these flows directly impacts the economic growth of these countries. The article also mentions the “deterioration of the labor market in the U.S.” as a factor affecting migrants’ ability to earn and send money, linking to the “decent work” aspect.

3. SDG 1: No Poverty

   • The article describes remittances as a “vital economic lifeline for many nations worldwide,” sent by migrants to “support family or businesses in their home countries.” This implies that these funds are crucial for covering basic needs and preventing families from falling into poverty, especially in countries where these flows constitute a large portion of the GDP.

Specific Targets Identified

1. Target 10.c: By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent.

   • This target is directly addressed through the discussion of a proposed “1% tax on remittances instated by the Trump administration.” This tax represents a transaction cost for migrants sending money home. The Mexican president’s plan to “reimburse the tax” also relates to mitigating these costs.

2. Target 8.1: Sustain per capita economic growth in accordance with national circumstances…

   • The article provides data showing the importance of remittances to economic growth. It notes that in 2024, Mexico received “$64.7 billion in remittances, accounting for nearly 4% of its gross domestic product.” For Central American economies, it’s even more significant, representing “more than 25% of GDP in Nicaragua and Honduras.” The reported decrease in remittances directly threatens the sustenance of economic growth in these nations.

3. Target 10.7: Facilitate orderly, safe, regular and responsible migration and mobility of people…

   • The article connects the drop in remittances to migration policies and migrant safety. It cites “U.S. migrants’ fear of going out to work and sending their remittances, for fear of being deported” and the “Trump administration’s immigration crackdown” as reasons for the decline. This highlights how non-orderly or unsafe migration conditions directly impact the financial flows that support development.

Indicators Mentioned or Implied

1. Indicator 10.c.1: Remittance costs as a proportion of the amount remitted.

   • The article explicitly mentions a potential “1% tax on remittances.” This figure is a direct measure of the transaction cost, which is the core of this indicator.

2. Indicator (related to SDG 8 & 10): Total amount of remittances (in United States dollars) as a proportion of total GDP.

   • The article provides precise data for this indicator. It states remittances account for “nearly 4% of its gross domestic product” in Mexico, “more than 25% of GDP in Nicaragua and Honduras, 23.5% in El Salvador, and 19.5% in Guatemala.” It also gives absolute values, such as the “$64.7 billion in remittances” received by Mexico in 2024.

3. Indicator (related to SDG 8): Annual growth rate of remittances.

   • The article implies this indicator by tracking the change in remittance flows over time. It reports a drop of “more than 15% year-on-year” and an almost “6% since the beginning of the year.” It also notes that this “marks a reversal after 11 consecutive years of growth,” clearly measuring the rate of change.

SDGs, Targets, and Indicators Analysis

Source: latintimes.com