The future of this $160 billion industry is at stake as US immigration policies become more stringent.
And after a record-breaking 2024, when remittances to Latin America and the Caribbean will reach a total of $160 billion, or 2.5% of the region’s GDP, according to the Inter-American Development Bank, the outlook for this lifeline may be on the verge of a structural shift.
Between the Trump administration’s tougher stance on immigration and the newly approved 1% tax on remittances under the Big Beautiful Bill, which is set to take effect on January 1, 2026, alarm bells are ringing across the region. Recent research by private bank JPMorgan suggests that this trend could be exacerbated by slowing job creation in the United States, which JPMorgan expects to grow by 2.7% in 2025 and 2.3% in 2026.
Against this backdrop, governments, along with private and central banks, are striving to soften the blow to remittance-dependent economies, especially in the Caribbean.
“If you are a country that relies heavily on remittances, you are now thinking about how to stimulate other parts of the economy in the longer term, even if it is only to circumvent some of the risks at this stage,” says Patrick Dane, CEO of consultancy PSD Global.
Ajay Srivastava, co-founder of the Global Trade Research Initiative, an Indian think tank, notes that a sustained decline in remittances could also affect the recipient country’s currency, by reducing the supply of dollars in the economy and restricting investments. “When remittance flows decline, households prioritize consumption needs at the expense of savings and investments.”
Governments have already begun the process of finding alternatives.
“Different governments in major remittance-receiving countries are looking for strategies to reduce the impact of the new tax on households that depend on these resources,” says Juan José Lee, chief economist for Mexico at BBVA Research. “Specifically in the case of Mexico, efforts will focus on increasing financial inclusion for remittance senders in the United States and for recipients in Mexico through the card issued by the government institution Financiera del Bienestar.”
The data is still inconclusive – for now
Despite the region’s remittance problems, research by Spanish giant BBVA, one of Latin America’s most prominent lenders, shows that overall numbers for 2025 so far remain mixed.
According to BBVA figures, remittance flows from the United States to Mexico fell sharply in the first half of the year, registering a 5.6% decline year-on-year. This decline was exacerbated by the decline of the US dollar by more than 10% against the Mexican peso, which intensified the impact on the disposable income of families. In contrast, remittances to other Central and South American countries recorded double-digit increases during the first half, compared to the same period of the previous year: to Honduras (+25.3%), Guatemala (+18.1%), El Salvador (+17.9%), the Dominican Republic (+11.2%), and Colombia (+13.9%).
With these numbers in mind, Lee does not yet see “conclusive evidence linking higher numbers of detainees or stricter border enforcement to remittance trends.”
However, the numbers may not be the whole story.
The risk is a potential decline in immigration flows to the United States, which is key to sustaining remittance growth over the long term, notes John Price, co-founder of the research and consulting firm Payments and Commerce Market Intelligence.
“Since remittance flows are typically driven by new migrants sending money home, this decline in migration limits future remittance growth,” he says. “History shows that remittancers slow sending their money significantly after three to five years of living in the United States.”
PSD Global’s Dane agrees, pointing to the “potential delayed impact of remittances.”
Migrant flows dwindle
According to US government data, ICE arrests rose to 19,000 in March from an average of about 8,000 per month between 2023 and 2024: a jump of more than 100%. While the number is still relatively small compared to the more than 11 million undocumented immigrants in the United States, it sends a clear message that “individuals should be more careful when making the decision to immigrate, even if they have the means to obtain legal status in the United States.”
Price adds that the Trump administration’s rhetoric on deportation, in itself, “has had a chilling effect on immigration.” “Prospective migrants, discouraged by highly publicized raids and threats, are returning voluntarily before arriving in the United States.”
This trend has a greater demographic impact.
According to a recent Pew Research Center analysis of U.S. Census Bureau data, the foreign-born population in the United States fell by about 1 million people in the first half of 2025: the first time this has happened since the 1960s. Moreover, US government data indicate that the US-Mexico border may be effectively closed to new illegal immigrants. In December 2023, the number of detainees at the border reached 250,000; By March 2025, it had fallen to just 7,000.
Risks remain high under the new immigration policy, and BBVA’s Lee agrees that “if migrant deportations increase in the second half of 2025 and continue over the remaining three years of the Trump administration, the flow of remittances to Latin America and the Caribbean could be significantly affected.”
Monthly data from the second half of 2025 to date show that the decline in remittances to Mexico is deepening, with July figures recording a dismal 16% year-on-year decline: the largest on record.
Search for alternative payment channels
Adding to this equation is the new tax on financial transfers.
While the initial proposal proposed a hefty 5% tax covering all means of payment but targeting only non-US citizens, subsequent revisions reduced the rate to 1%, which applies to all remittance senders including US citizens, but applies exclusively to remittances initiated through a physical means of payment, such as cash. The Joint Committee on Taxation estimates that the tax would generate about $26 billion over the next 10 years, which could be used to offset part of the estimated $170 billion in spending on immigration enforcement and border operations imposed by the bill itself.
However, experts warn that for low- to moderate-income immigrants, even a 1% remittance tax could be painful, especially for those who find it difficult to adapt to new payment methods.
“This is a long-term adaptation,” says Dane. “Many immigrants who use cash have difficulty or are reluctant to use legal payment methods in the United States. It takes time for them to adapt.”
The booming cryptocurrency payments business in Latin America expects to see more cash inflows due to the remittance tax. After registering a record 40% increase in 2024, according to Chaina Analysis data, with stablecoins accounting for nearly 90% of the total volume, cryptocurrency giant Binance now sees the region as the fastest adopter in the world. The trend, encouraged by historical fluctuations in the local currency, is igniting a regional fintech gold rush, as companies strive to secure access to fast, seamless, cross-border, tax-free transactions.
“Fintech companies across Latin America are using stablecoins to meet customer demand for transparent and stable money transfer tools,” says PCMI’s Price. But he warns: “This development presents new risks. Stablecoins remain lightly regulated… This raises concerns among regulators and incumbents who fear cryptocurrencies will develop into a final race over compliance obligations.”
