Latin America Nears 16th Straight Year of Rising Remittances as Momentum Begins to Fade, Report Finds

Latin America and the Caribbean are on track to post a 16th consecutive year of record remittance inflows, even as growth shows clear signs of slowing, according to a new report by the Inter-American Development Bank (IDB).

The IDB estimates that remittances to the region reached a new high in 2024 and are expected to continue rising in 2025, extending a record-breaking streak that began in 2010. The flows remain a key source of household income and foreign currency across much of the region, particularly in Central America, the Caribbean, and parts of South America.

However, the report warns that the pace of growth is losing momentum after the surge seen during and immediately after the COVID-19 pandemic. The IDB points to "signals of fatigue" driven by slower job growth in migrant-receiving countries, easing inflation in host economies, and the gradual normalization of extraordinary support mechanisms that boosted remittances in recent years.

The United States continues to be the dominant source of remittances to Latin America, accounting for the majority of flows, followed by Spain. The report notes that labor market resilience among migrants has so far sustained transfers, but that tighter financial conditions and higher living costs in destination countries are beginning to weigh on migrants' capacity to send additional funds.

Mexico, the region's largest remittance recipient, remains a central driver of overall volumes, while countries in Central America and the Caribbean show higher dependence on remittances as a share of gross domestic product. In several smaller economies, remittances account for more than 20% of GDP, underscoring their macroeconomic importance.

Despite the moderation in growth, the IDB says remittances continue to play a stabilizing role for recipient countries by supporting consumption, reducing poverty, and cushioning external shocks. At the same time, the report cautions that reliance on remittances leaves economies exposed to downturns in migrant-receiving countries.

The IDB concludes that while remittances are likely to remain elevated in the near term, policymakers should prepare for a less dynamic phase ahead and focus on strengthening domestic growth and employment to reduce long-term dependence on external income flows