Remittances and Poverty during an Economic Crisis: Honduras and El Salvador

Abstract

Remittance flows to Latin America showed an increasing trend before the global economic crisis. A number of factors contributed to this upward trend: a decline in the cost of transferring money, increased availability of entities facilitating the transfer of money, and an increase in the stock of migrants (World Bank 2005). Remittances to the region grew by an average 17 percent annually between 2000 and 2008, but the rate of growth slowed in 2007 and further decreased in 2008, as the crisis hit migrant employment and income levels in host countries such as the United States, Spain, and Japan (IDB 2010). As the crisis continued, remittances to the region dropped significantly in 2009, the first time this had happened since 2000. Remittances to countries such as Honduras and El Salvador were especially hard hit, with flows to both countries decreasing dramatically in 2009 from the previous year by approximately 7 percent in El Salvador and 11 percent in Honduras (figure 5.1).