2024-08-26 18:57:36
In July, remittances increased by 32.1%. The Bank of the Republic reported that in July, the amount of foreign currency sent by the Colombian diaspora reached US$1,006 million. So far this year, US$6,633 million have arrived in Colombia.
HUILA DAILY, ECONOMY
By: Gustavo Patiño
The Bank of the Republic of Colombia has revealed figures on the volume of remittances sent to the country in July 2024, which reached US$1,006 million, marking the second highest figure in the country’s history. This flow of money from abroad not only underlines the economic importance of the Colombian diaspora, but also offers a significant respite for many families who depend on this income to cover their basic needs.
Figures released by the Bank of the Republic show an increase of 32.1% compared to July 2023, when remittances reached US$761.61 million. However, despite this impressive growth, the amount recorded in July 2024 represents a slight decrease of 1% compared to June, when the historic record of US$1,017 million was reached.
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A significant increase
Throughout 2024, remittances have maintained an upward trend, with a cumulative total between January and July of US$6.633 billion, representing an increase of 17.7% compared to the same period in 2023, when the total was US$5.634 billion. This continuous flow of remittances reflects not only the commitment of Colombians abroad to their families in the country, but also the key role that these resources play in the Colombian economy.
In the case of Colombia, these transfers come mainly from Colombians living abroad who, month after month, send money to their families to help with housing, education, health and other basic needs. According to the Banco de la República, “remittances include current transfers made by emigrants to their country of origin, whether in cash and/or in kind, and are part of the current transfers recorded in Colombia’s balance of payments.”
Crucial source of income
These remittances represent a crucial source of income for many Colombian families, especially in regions where economic opportunities are limited. In fact, in some departments, such as Nariño and Valle del Cauca, remittances constitute a fundamental pillar of the local economy. For many people, these funds are the difference between survival and extreme poverty.
In addition to their impact on individual households, remittances also have a significant macroeconomic effect. By bringing foreign currency into the country, remittances contribute to the stability of the balance of payments and can influence the exchange rate of the Colombian peso against other currencies. In times of economic uncertainty, remittances act as a buffer, helping to stabilize the economy and keep consumption at relatively high levels.
Five countries
Remittances to Colombia come from a variety of countries, but there are some nations that stand out as the main senders of these resources. The United States is by far the main source of remittances to Colombia. This country is home to a large community of Colombians, many of whom have emigrated in search of better economic opportunities. Remittances sent from the United States represent approximately 50% of the total received by Colombia. The strength of the U.S. economy and access to better-paying jobs allow many Colombians to send significant amounts of money to their families in Colombia.
Spain is another key country in sending remittances to Colombia, ranking second in remittance volume. The history of migration between Colombia and Spain is long and complex, with a large number of Colombians establishing their lives in cities such as Madrid and Barcelona. Despite the economic challenges Spain has faced in the past decade, Colombians continue to send remittances regularly.
A new destination
In recent years, Chile has emerged as an important destination for Colombian migrants, especially due to its economic stability and the job opportunities it offers. This South American country has seen an increase in the population of Colombians, and with it, an increase in remittances sent from Chile to Colombia. Although the total volume is smaller compared to the United States and Spain, the growth has been notable.
The UK is also an important source of remittances for Colombia. The Colombian community in the UK, although smaller compared to that in the US or Spain, is still significant. Remittances sent from this European country reflect the integration of Colombians into the British economy, particularly in sectors such as hospitality, construction and services.
Canada, similar to the United Kingdom, is home to a growing Colombian community that contributes to the flow of remittances to Colombia. This country is known for its inclusive immigration policies and economic stability, which has attracted many Colombians in search of a better life.
Magnification factors
The notable increase in remittances arriving in Colombia in 2024 can be attributed to several interrelated factors. Some of the most notable include the post-pandemic economic recovery, the strengthening of the dollar, the cost of living in Colombia, and increased migration.
Following the devastating effects of the COVID-19 pandemic, many economies, particularly in the northern hemisphere, have begun to recover significantly. This recovery has allowed Colombian migrants in these countries to find better employment opportunities and, therefore, to send more money to their families in Colombia. The US dollar has strengthened against the Colombian peso in recent months, meaning that Colombians sending money from the United States can send larger amounts in peso terms. This situation has encouraged many migrants to take advantage of the favorable exchange rate situation to increase the remittances they send.
Rising cost of living
The cost of living in Colombia has increased, leading many families to rely even more on remittances to cover their basic needs. This reality has motivated Colombians abroad to send more money to ensure that their loved ones can maintain their standard of living. The phenomenon of Colombian migration has not stopped, and more and more people are leaving the country in search of better opportunities. These new migrants, upon settling abroad, begin to send remittances to their families, which contributes to the general increase in these flows.
The impact of remittances on the Colombian economy cannot be underestimated. These money transfers are a vital source of income for millions of families across the country, allowing them to access goods and services that would otherwise be out of reach. Remittances help finance education, health, housing and entrepreneurship, playing a crucial role in reducing poverty and promoting local economic development.
Source of stability
Moreover, in a context of rising inflation and global economic challenges, they offer a source of stability for many Colombian families. The steady flow of foreign currency also strengthens the country’s international reserves, contributing to macroeconomic stability and allowing the government to better manage external shocks. From a social perspective, remittances also have a profound effect on family and community dynamics. Families that receive remittances often experience a change in their quality of life, which can translate into greater educational opportunities for children, better access to health services, and generally an improvement in overall well-being.
Challenges
Despite the benefits that remittances bring, there are also challenges associated with their dependence. One of the main concerns is the vulnerability of recipient families to changes in the migration policies of the sending countries or fluctuations in the global economy. A weakening of the labor market in the United States or Europe, for example, could significantly reduce the flow of remittances, affecting millions of Colombians.
Furthermore, the high dependence on remittances can discourage local economic development in some regions, where people may become overly dependent on these incomes instead of seeking productive alternatives at the local level.