Cuba Western Union Rep. Pic
Western Union announced on Wednesday that they will be re-establishing their money transferring services between the United States and Cuba in a limited capacity. This is a representational image. Alistair MacRobert/Unsplash.

Remittances to Latin America and the Caribbean (LAC) are set to increased by 9.5% in 2023 according to a new report from the Inter-American Development Bank. In 2022, LAC countries generated $142.4 billion through remittances.

Remittances allow people in one country to send money to another person in a different country. In the U.S. and Latin America, this financial service has typically been used by immigrants to send money to their home countries.

The recent increase in remittances can be pinpointed to the influx of remittances received in countries such as Nicaragua, which in 2023 saw a 13.2% increase in remittances, and other countries like Argentina and Paraguay.

In 2023, Mexico still received the most remittances, accounting for 41.2% of all funds sent to LAC countries. However, remittances grew in Central American countries by 13.2%; in the Caribbean remittances increased by 2.6%; and in South America the service saw a 7.9% increase.

According to the report, migration to the U.S. and a strong U.S. economy were the main factors behind the recent influx of remittances to Latin America.

"The growth in the average weekly salary, as well as the increase in the employed labor force, meant a growth in the consolidated income of all immigrants, which together with the growth in the migrant population, largely explains the growth in remittances to LAC," read the report.

During 2023 there was also an increase in remittances from Spain. According to the report, remittances originating from the European country increased by 9.7% in the second quarter of 2023. This coincided with a 4.4% increase in LAC migrants in Spain.

The growth is also part of a recent trend that has seen remittances grow year-over-year since 2018. The trend has, in one part, been impacted by new technologies as, according to the Migration Policy Institute, the COVID-19 pandemic brought about a wave of new fintech technologies that made remittance easier and more cost-effective.

Prior to digital remittances, people had to go in person to a bank or money transfer agent to initiate the operation, and the recipients also had to travel to a bank or money transfer agent to receive the funds. However,remittance services are now built into some banking platforms and other apps are dedicated solely to sending money across borders.

According to Jose Arturo Villanueva, founder of Alza, a banking platform with integrated remittance services, digital remittances have also changed how people back home receive money, as new technologies have made the service more convenient.

"You can send it [remittances] as a bank transfer, and somebody on the receiving side receives the funds in their bank accounts in Mexico, Brazil, and other countries. They can also receive it as a cash pickup in some countries, and you can push money to a debit card in some countries," Villanueva told the Latin Times about the various ways to receive a remittance.

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