The possibility of implementing a tax to send family remittances would result in a social impact on Guatemalan homes, with a reduction in consumption and an increase in the risk of falling into poverty, according to experts.
Remittances have become a pillar of the family economy of about three million Guatemalan homes, functioning as a fixed income to cover household expenses, housing construction, education, savings and the impulse of commercial activities.
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The actions in the United States that can lead to the implementation of a transfers tax would have several effects from a social perspective, especially in homes that depend exclusively on that income.
The monetary authorities, in recent analysis, have stated that there would be no macroeconomic risk, and that the estimated impact would be US $ 860 million, equivalent to 0.5% of the gross domestic product (GDP). However, it is alerted to the possible social consequences. If approved, the tax would enter into force in 2026.
The average value of remittances received per household ranges between US $ 300 and US $ 500. They have worked as a vital livelihood, compensating income that, in many cases, are sent by the husband to the housewife to cover basic, doctors and feeding expenses. The majority of the beneficiaries reside in rural areas, where the cost of living is lower than that of Guatemala City and its surroundings.
Social effects chain
Taxing remittances would imply that a percentage of the resources sent would be retained as a tax in the United States.
Abel Cruz Calderón, Vice Chancellor of the Mesoamerican University, explained that the available income would decrease, which would affect the purchasing capacity of the Guatemalans who receive remittances.
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Along the same lines, Fredy Arizmendy Gómez, professor of macroeconomics at the University of San Carlos de Guatemala, said that the impact would vary through territories, since there are municipalities where the effect could be significant.
He cited the case of a village in Joyabaj, Quiché, where many migrants send money; A retention would seriously affect the local economy. He added that income contraction would imply health, food and other basic items. Although there would be no effect on GDP, it would affect the gross national product.
As a critical scenario, Gomez warned that remittance flows could stagnate or even reduce.
Blow for families
Guillermo Díaz, from the Institute for Research in Socio -Humanian Sciences of the Rafael Landívar University, said that the impact could be void if migrants absorb the tax. However, it projects that remittance growth would be reduced by 3.5%, staying above 10%.
“The available income would decrease, which would affect the purchasing capacity of Guatemalans who receive remittances”
Abel Cruz Calderón, Vice Chancellor of the Mesoamerican University,
“Each percentage point in the growth of remittances drives a tenth point in consumption,” he explained. He added that the impact would fall on families that depend exclusively on remittances, whose average by shipment is around US $ 500. The tax would imply a reduction close to Q131, amount equivalent to a food day in rural areas.
Cruz Calderón added that migrants must increase the amount sent to between US $ 110 and US $ 115 to cover the tax and maintain the level of family consumption.
End of remittance cycle?
Díaz warned that the effect of the tax can be minimal on its own, but combined with mass deportations and lower migration, it could generate alarm. He estimated that these three factors could reduce revenue from remittances by up to US $ 1,500 million, affecting almost one in three families and promoting greater vulnerability to poverty.
The role of the sender
Faced with the possible reduction of amounts received, families must take adjustment measures, while the migrant must assume additional costs. “If the bank charges commission and now a tax is applied, the sender must calculate both charges to ensure that his family receives the desired amount,” said Cruz Calderón.
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Gomez suggested designing labor policies for returning, since many will not try to migrate again. It also foresees an increase in entrepreneurship, especially by women heads of household who will be incorporated into the labor market.
Díaz emphasized the need to diversify the sources of income to reduce the dependence of remittances, especially in the medium term, when the impact of the migratory policies of the United States is expected.
Fears towards the future
Pedro Pablo Solares, an analyst on migratory issues, presented a vision of the potential impact of the United States:
What is the social impact on Guatemala?
It is difficult to anticipate the reaction of those who send remittances. Although a reduction of US $ 860 million is expected, remittances have shown to be anti -cyclicals, and on other occasions they have grown up despite adversities. The strongest impact would occur on savings and investment, rather than consumption.
Why is it warned about a social impact rather than macroeconomic?
Because, according to the 2022 IIM survey, more than six and a half million people in Guatemala are beneficiaries of remittances. There is fear that this source of foreign exchange is at risk by the policies of the current US government.
What social consequences can arise?
The tax could be part of a strategy to demotivate irregular migration, together with deportations, arbitrary apprehensions and asylum restrictions. Remittance reduction could increase poverty, malnutrition and violence, in addition to generating school dropout and curbing sectors such as construction, transport and health.
How should this situation be addressed?
Due to its national relevance and transverse scope, it must be addressed from the highest level of the Executive.