They warn of a drop in remittances due to the recession in the United States

As various sectors in the United States prepare for the next economic recession, and President Joe Biden asserts that a recession can be avoided, experts and analysts warn that the flow of remittances to El Salvador and the region will decrease with the solutions of the current situation. US economic slowdown.

US economists point out that inflation and price hikes among essential consumer products will continue in the coming months; While the recession will start to become more visible in early 2023. However, changes in the economy are already affecting Latino and immigrant families who send remittances to Central American countries.

“This affects many products in general, we are not only talking about food and basic products, but also vehicles and gasoline. It will remain high for some time,” said economist Giovanni Delfino.

“The first effect is felt in remittances, because the US economy slows down and when the economy cools down, people work less and the value per hour worked goes down.”

Giovanni DelfinoAmerican economist

In fact, price changes are already beginning to be felt and the price of gasoline is one of the prices that has caused the greatest economic impact on the family economy. Four months ago, a family could fill an 18-gallon tank in their truck for about $65. Now, that amount has almost doubled and to fill the tank of the same car, you pay roughly $113.

Delfino explains that the first effect of rising prices, changes in the household economy and stagnating domestic economy in the United States first affects family transfers.

“The first effect is felt in remittances, because the US economy slows down and when the economy calms down, people work less and the value per hour goes down. People who got two or three thousand dollars in income are not going to get that anymore. Then they will be able to send less money. to El Salvador or Guatemala.”

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Edwing Lima, an economic advisor and bitcoin expert in Europe and the United States, warns that with the US Federal Reserve and the European Central Bank raising interest rates, the economic impact on countries like El Salvador will be greater.

Lima explains that if the interest rate in the United States reaches, say, 5%, this figure will not be the same in Salvadoran banks or in Central American banks and can reach, in that region, 8%. Over the past weeks, many local transactions in Washington, DC, have been affected by the interest rate increase, housing among them.

“As the economy slows in the US, we have two effects. One is remittances, they arrive less because people work less and the value per hour goes down. On the other hand, entrepreneurs in El Salvador will grab more and more expensive money and when it is loaned, the The money will be loaned more expensively,” Lima explained.

On top of all this, Lima points out that the economic problem arising from buying bitcoin in El Salvador will deepen the economic recession in the Central American country, which now needs to lend money in order to meet its financial obligations and international debt.

“The country risk in El Salvador is 26%, but you have to add a 2% or 3% interest rate to the Fed. In other words, for El Salvador to be able to borrow to pay off its debt, you have to pay 30% more to lend, and debt of 30% per year means that This debt doubled in two years.”

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