Remittances and Correlations: Mexico and Central America North Triangle (Guatemala, El Salvador and Honduras)

Remittances: Historic Evolution

The remittances issue remains attractive, not only because research is relatively in the beginnings, (ie, is not yet known with accuracy the data sources) but also for its sudden changes. Another factor that makes the remittances striking or very conspicuous, are the multiple variables, as it always is in search of knowing what is that variable does make react. The next graphs present the monthly historical performance from 2008 to the latest available date of remittances transfers as identified in the four countries individually described: Guatemala, El Salvador, Mexico and Honduras:

Source: Central Banks.

RMGT = Remittances Guatemala

RMMX     = Remittances México

RMESA =Remittances El Salvador

RMHN  = Remittances Honduras

In this publication, data published by the central banks of Mexico, Guatemala, Honduras and El Salvador which will be called hereafter the Northern Triangle are cited. Looking at the monthly evolution of remittance income in 2013 Mexico reported an average of $ 1800 million remittance inflows in recent years. Taking 2013 as a reference, remittance income in Mexico is 4.3 times higher than Guatemala, is upper 5.5 if compares with El Salvador and 7.1 times more than Honduras however would be 1.8 times the combined income of the three Central American countries. The graph describes monthly historical comparison between these four countries observed from 2008 to 2014. 

Source: Central Banks. Secundary axe: Right axe exclusive to México.

Correlations between México and North Triangle(Guatemala, El Salvador y Honduras) 2008-2014

Establishing the assumption that most of remittances flows comes from the United States, and from the observed behavior, certain variations that are displayed can be correlated. Therefore, a comparison was made using the correlation of income from remittances by observing the behavior of remittances from Mexico, Guatemala, El Salvador and Honduras for the same period. For example, for the period from January 2008 to August 2014, monthly data, the following correlations were observed:

Source: Central Banks. 

Abbreviations: 

RGT = Remittances Guatemala

RMX     = Remittances México

RSV =Remittances El Salvador

RHN  = Remittances Honduras

RHN+1= Remittances Honduras +1 period lag

Analyzing the data presented the following insights:

1. Guatemala, El Salvador y Honduras: The table shows that there are high correlations between countries. Whether seasonally by measurement methodology or for other reasons, changes in remittances from Guatemala have high correlation with remittances from Honduras and is the highest coefficient of the table. A relatively good correlation was also observed in the behavior of remittances from Guatemala to variations in remittances from El Salvador. 
2. El Salvador and Honduras: relatively good correlations between El Salvador and Honduras behaviors. 
3. Mexico: In the other side, although correlations with Mexico are above 0.5, it is not considered to be good estimates. 

According to the observed behavior of Honduras, calculations where the data were presented with one month lag were performed. This adjustment was made to compare the monthly data of Honduras regarding a month later to other countries (eg January-2009 vrs to Honduras in February 2009 for the other countries). As seen in the table, one can not conclude that the correlation is better since the coefficients are lower than the data in the corresponding time.

Although it is known that almost all immigrants residing in the United States, it is very important to have a demographic profile for flows and interactions of remittances. It is worth indicating that countrymen are responsible to keep for example alive the demand for called "nostalgic products" because, among other economic ties with countries that maintain, they become generators of external demand. For more information, two important sources of information are:

Guatemalan Profile Jun-14 (in spanish)

Remittances and expenditures in Honduras Ago-14 (in spanish)

Article. Remittances and Correlations: Mexico and Central America North Triangle (Guatemala, El Salvador and Honduras) Latinoamericana Consulting Group. Guatemala, Centroamérica. Oct-2014. latinoamericana@consultant.com. @LATAMConsulting