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Remittances account for 10 percent of Guatemala’s GDP

December 2, 2014

JUTIAPA, Guatemala – The small village of Horcones sits at the end of a pothole-filled road in Jutiapa, in southeastern Guatemala. Here, about 40 percent of the population is dedicated to raising livestock, earning an income that isn’t reflected in the wealth of the whitewashed, Grecian-columned houses that are found in this farming community.

The majority of people here seem to know someone who works abroad and sends money home, a situation that is replicated around the region and accounts for affluent properties springing up in less-than-affluent areas.

Remittances, or money sent by expatriate workers to their home countries, have been steadily increasing in Guatemala – despite stepped-up deportations from the United States – and now account for about 10 percent of the country’s gross domestic product, according to 2012 data from the World Bank.

In 2013, Guatemala received more than $5.1 billion in remittances – the second highest amount in Latin America after Mexico – and Guatemala’s Central Bank predicts the figure will grow by around five percent this year.

Griselda Toj lives in Sacatepéquez, 40 kilometers from Guatemala City, and each month she receives on average $330 from her husband, who works on a dairy farm in the U.S. state of Idaho.

“The money he sends back helps us a lot to buy food for the children, send them to school and buy them medicine if they get sick,” Toj said. “If he weren’t there, we wouldn’t be able to cope, because over there he has a lot of work.”

Poverty, violence and family reunification are among the main driving forces behind Guatemalans deciding to make the journey north.

“Our life is difficult here. My husband left three years ago because my son became ill with asthma and bronchitis,” she said. “The medicine is expensive and he had to use a special apparatus. We could hardly afford to pay for it.”

In October, more than $500 million was sent back by Guatemalans working abroad, predominantly in the U.S., which represents an 8 percent increase compared with the same month last year.

Like many people who receive remittances, Toj is saving to build a house – an example of the effect that Guatemala’s Construction Chamber says money sent from abroad is having on reducing the country’s housing deficit.

However, experts highlight that while remittances enable some people to save, invest in education and contribute to the local economy, it is an unstable source of income that is often squandered due to a lack of financial information for recipients on how to manage the money.

“Yes, remittances can reduce poverty,” said Beatriz de Azurdia, from the National Council of Migrant Services. “But we need to take into consideration the risks migrants face and the abandonment kids feel, which can cause families to disintegrate and children to lack guidance. Also, the senders have little say over how the money is invested.”

To combat this, a Guatemalan company recently introduced an electronic remittances gift card, which allows migrants to specify where the money they send back is spent.

In July, the Guatemalan government launched a campaign outlining the risks of exploitation and death that undocumented migrants face on their journey north. However, the lack of employment opportunities in Guatemala and many people’s desire to emulate the improved lifestyle of their neighbors who do receive remittances is keeping the “American Dream” alive.

See also: Inter-American Dialogue honors Guatemalan businessman, civic activist Salvador Paiz

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