The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Central America: Remittances slowdown begins to hit home

The recession in the US economy is beginning to bite in central America, leading to a big slowdown in remittance flows that are vital to the region’s health. Guatemala and El Salvador, in particular, are most vulnerable to a drop in the growth in money flows from relatives in the US and elsewhere.

In Guatemala, funds grew 4.5% to $4.3 billion, the smallest increase in nine years according to the central bank. Remittances contribute about 11% of the country’s GDP.

In El Salvador, remittance flows reached $3.8 billion in 2008, up 2.5% on the previous year, according to the central bank. That compares with a growth rate of 6.5% in 2007. About 2 million Salvadorians live in the US, the country’s main trading partner.

Despite the worrying trend, Guillermo Handal, El Salvador’s finance minister, says that the country’s economic fundamentals are solid. "Given the current environment, we remain positive, as public investment for 2009 will reach a record level of $725 million," he says. "In addition, agriculture production will grow nearly 10%, helping El Salvador become self-sufficient in its food supply for basic grains."

The country’s financial system is weathering the storm too. "El Salvador’s financial system is the most solid in central America and within the Latin American region is one of the best regulated and strongest regarding reserve requirements," says Handal.

He adds that reserve requirements have been raised to 25% from 22%, while commercial banks have nearly another 7% in highly liquid assets totalling more than 32% in reserves to meet all their short-term requirements.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree