Introduction
The International Institute of Finance (IIF) has warned that the United States’ current migration policies will negatively impact both the US and Latin American economies. The IIF, a leading association of global financial institutions, estimates that remittances to Mexico will gradually decrease by 3-4 percentage points annually, resulting in a 13% reduction by 2026 compared to the 2024 peak.
Remittances and Their Importance
Remittances are crucial for many Latin American countries, with Mexico being the regional leader in recent years. In 2024, Mexico received a record-breaking $64.745 billion in remittances. A 4% decrease in 2025, as projected by the IIF, would still leave Mexico with an annual inflow of $62.155 billion. However, the 13% reduction by 2026 would mean a loss of $8.416 billion compared to the 2024 figures, resulting in an annual inflow of $56.328 billion.
Impact on the US Economy
The IIF’s analysis, led by Chief Economist Marcello Estevao and Latin America Research Director Martín Castellano, highlights the adverse effects of these policies on the US economy. The reduction in foreign-born workers will intensify job creation pressures and wage increases, particularly in the services sector. This trend has already led to increased salary pressures amid labor shortages, partially offsetting the demographic challenges posed by an aging native population.
Migration Trends and Future Projections
The IIF’s analysis does not focus on remittances for any specific country. However, Mexico has been a significant recipient of remittances in Latin America and the Caribbean. The current migration policies are expected to cause a net and disproportionate decrease in Hispanic migrants, immediately affecting job creation in sectors like construction, hospitality, and services.
Following record-breaking migration in 2022 and 2023, which helped alleviate post-pandemic labor shortages, the IIF now anticipates a substantial decrease in entries, potentially falling by 87% compared to 2024. This decline could negatively impact the US GDP by 0.8 percentage points in 2025, according to an analysis by the Federal Reserve Bank of Dallas.
Key Questions and Answers
- What is the projected decrease in remittances to Mexico by 2026? The IIF estimates a 13% reduction in remittances to Mexico by 2026 compared to the 2024 peak.
- How will this impact the US economy? The reduction in foreign-born workers will intensify job creation pressures and wage increases, particularly in the services sector.
- What are the future projections for migration to the US? The IIF anticipates a substantial decrease in entries, potentially falling by 87% compared to 2024.
- What could be the impact on the US GDP? According to the Federal Reserve Bank of Dallas, a drastic decrease in southern border crossings and measures to deport foreign workers could reduce the US GDP by 0.8 percentage points in 2025.
