Latin American and Caribbean countries will receive approximately $160.9bn in remittances in 2024, representing a 5% growth compared to the previous year, according to a report by the Inter-American Development Bank (IDB).

Although the pace of growth has slowed, these financial flows continue to serve as an essential economic lifeline for several countries in the region, with Mexico capturing the largest share at $65.1bn – accounting for 40.5% of total remittances sent to Latin America and the Caribbean.

The United States, where President Donald Trump vows to deport "millions" of undocumented immigrants, remains the primary source of these remittances, followed by Spain and other European countries. Canada and South American nations such as Chile and Argentina also contribute significantly to these flows.

Guatemala has emerged as the second-largest recipient in the region and the leading beneficiary in Central America, with remittances reaching a historic $21.5bn in 2024 – $1.7bn higher than the amount collected in 2023, according to the Bank of Guatemala.

The Dominican Republic ranks third with $10.1bn, followed by El Salvador with $8.4bn, where remittances account for approximately 24% of the country's GDP, highlighting its heavy dependence on these earnings.

Colombia has experienced remarkable growth in remittance receipts, recording a 17.2% increase to reach $7.5bn, driven by increased migration in recent years. Honduras ($7.0bn), Ecuador ($4.7bn), Peru ($4.5bn), Nicaragua ($3.9bn) and Bolivia ($1.8bn) complete the top 10 recipients.

For many Central American nations, these remittances have become economic lifelines of extraordinary proportions. In 2023, El Salvador, Guatemala, Honduras, and Nicaragua collectively received nearly $42bn in family remittances, a figure that constitutes approximately a quarter of their combined GDP and exceeds other critical economic inflows such as foreign investment, tourism, and exports.

The economic dependence on these transfers varies significantly across the region. Remittances now account for approximately 27% of GDP in Honduras, 26% in Nicaragua, 24% in El Salvador, and nearly 20% in Guatemala. By contrast, wealthier nations with lower emigration rates, such as Panama and Costa Rica, see remittances contributing only 1-5% of GDP.

This dependence has grown substantially in recent years, with remittances to these four nations surging from $19bn in 2017 to $41.8bn in 2023, reflecting increased emigration primarily to the United States.

The IDB report, published in November with preliminary figures for some months, details how these funds are utilised. The vast majority (88.1%) of remittances are directed towards daily expenses such as food, transportation and basic services.

Medical expenses account for 57.1% of usage, whilst education expenses represent 31.4%. Debt repayment (20.1%), savings or business investment (13.8%) and home purchase or remodelling (13.1%) round out the main uses.

These transfers allow recipient families to improve their quality of life, access education and healthcare services, and in some cases, invest in their own businesses, generating a multiplier effect throughout local economies.

According to financial experts, without these vital remittances, the economies of several Central American countries would have met severe difficulties long ago. They play a crucial role in keeping financial systems afloat and driving economic activity in the absence of other significant dollar inflows.

But many now fear these substantial financial flows could face headwinds from hawkish US migration policies. The Trump administration has championed a tougher stance on immigration, which is likely to affect the ability of migrants to work and send money back to their home countries. For countries like Honduras, Nicaragua, El Salvador and Guatemala, where remittances account for a fifth to more than a quarter of GDP, any significant disruption to these flows would have profound economic implications.