LatinNews Daily - 25 June 2025

*The executive secretariat of the Central American monetary council (CMCA), part of the Central American integration system (Sica), has released a new report warning of the impact in Central America of US President Donald Trump’s proposed 3.5% tax on remittances sent home by expatriate workers. Highlighting that remittances represent between 19%-26% of GDP in countries such as El Salvador, Honduras, Guatemala, and Nicaragua, the report estimates that there are 1.5m Salvadoreans, 1.6m Guatemalans, 1.3m Hondurans, and 437,300 Nicaraguans in the US, including legal residents and naturalised citizens, as well as illegal migrants. The CMCA report warns that the tax will significantly increase the cost of sending money home. It estimates for instance that the average cost of sending US$350 to Central America could increase from US$9.21 to approximately US$23. Based on an extrapolation of remittances sent in 2024, CMCA estimates that the proposed tax could result in a loss of US$1.8bn sent to Central America (except for Costa Rica) and the Dominican Republic. It warns that a drop in remittances will reduce family consumption, affecting sectors such as retail, agriculture, and small business. It also warns that this loss in income could trigger a new wave of migration, as well as posing financial risks, with migrants opting to send money home via informal channels such as cash and cryptocurrency, which could increase the risks of illicit activities such as fraud and money laundering.

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