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Planet Money

The remittance mystery

with Larissa Vargas, Manuel Orozco, Dean Yang, Ugo Noypino

Published October 30, 2025
View Show Notes

About This Episode

The episode investigates a puzzling surge in remittances flowing from the United States to several Central American and Caribbean countries, especially Honduras, despite heightened immigration enforcement and declining new immigration. Through interviews with a Honduran bank remittance manager, migrants, and economists, the reporters explore how fear of deportation, a looming remittance tax, and migrants' desire to build savings back home are driving this spike. They also examine how critical remittances are to economies like Honduras, the risks of over-dependence on this income, and the potential economic shock if these flows decline in the near future.

Topics Covered

Remittances Immigration policy and border security Labor and workforce issues Wealth inequality International trade Banking competition Economic development Dutch disease Poverty and inequality

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Quick Takeaways

  • Honduras and several other countries have seen an unusually large surge in remittances, with Honduras experiencing a 26% increase in a year and inflows approaching $10 billion, almost 25% of its GDP.
  • Many Central American migrants are sending larger, less frequent transfers, often moving life savings into bank accounts back home out of fear of deportation and legal uncertainty in the U.S.
  • The surge is not driven by more migrants, a booming U.S. labor market, or new technology, and it notably does not extend to Mexico, where migrants are generally longer-settled and often have more secure legal status.
  • Economists describe remittances as both a powerful anti-poverty tool and a potential macroeconomic vulnerability, including risks similar to "Dutch disease" and political complacency.
  • Honduran policymakers are worried that a likely decline in remittances in the next few years could cut national GDP by several percentage points and are discussing how to prepare the economy and create jobs for possible returnees.

Podcast Notes

Introduction and emergence of the remittance mystery

Larissa Vargas notices unusual remittance patterns

Larissa sees a growing flow of money from overseas into Honduras[0:29]
• About a year before the episode, while at her desk at Honduras' largest bank, she observed incoming remittances picking up gradually and then intensifying over weeks and months
Her role and experience at Banco Ficosa[0:50]
• Larissa works at Banco Ficosa as the remittance manager and has been in that department for 20 years
• She oversees more than a billion dollars that come into bank accounts from other countries, mostly the U.S., via channels like Western Union and MoneyGram
Long-term trends in Honduran remittances[1:10]
• Larissa has seen remittances grow as more Hondurans have moved to the United States
• She notes that technological improvements have made it easier to send and track cross-border money transfers
2024 remittance spike at Banco Ficosa[0:50]
• Larissa describes the current year as having a 26% increase in remittances, which she calls atypical and "rowdy"

What remittances are and normal patterns of sending

Definition and typical uses of remittances[1:47]
• Remittances are money that migrants send back to their countries of origin to support relatives, build houses, or open businesses in their hometowns
Usual remittance frequency[2:03]
• Migrants abroad tend to send remittances on a regular schedule, such as every couple of weeks or every month

First signs of the anomaly in transaction sizes

Small but noticeable increases in average transfer amounts[2:14]
• Larissa recalls that the average remittance used to be around $280, but she started seeing averages of $290 and $300
• That small change was her first clue that something larger was happening
Appearance of unusually large transfers[2:34]
• By January, Larissa began to see much bigger remittance deposits, including transfers of $7,000 and $10,000, which she describes as not very common
• She interprets these large inflows as likely representing migrants' life savings that had been stored elsewhere
Coordination and confusion among remittance stakeholders[3:11]
• Larissa and her team have constant communication with remittance companies and asked if others were seeing the same trend and what they thought was happening
• She says there are many theories, but nobody has definitive answers, contributing to the sense of a "remittance mystery"

Broader regional surge and competitive scramble for remittance business

Remittance competition within Honduras

Businesses vying to handle remittance payouts[3:41]
• Larissa notes that in Honduras, remittances are such an important part of the economy that every business seems to want a piece of the remittance flow
• Supermarkets advertise that people can pick up remittances and immediately use the money for groceries
• Banks promote depositing remittances with them, offering raffles for prizes such as a new car or a medical checkup as incentives
Novel marketing approaches compared to prior years[4:18]
• Larissa says these kinds of promotional offers tied to remittance pickup and deposit are different from what she saw in previous years

Regional pattern of increased remittances

Other countries experiencing similar surges[5:26]
• The sudden rise in remittances is not limited to Honduras; similar surges are observed in El Salvador, Guatemala, Nicaragua, Haiti, and Ecuador

Framing the mystery and episode setup

Hosts introduce the "remittance mystery"[4:50]
• The hosts describe the U.S. as the single biggest source of remittances globally and note that it is undergoing a big, public crackdown on immigrants without legal papers and a drop in new immigration
• Despite this, Larissa sees new money flowing into Honduran accounts, prompting the central question of the episode
Episode agenda[5:15]
• The show aims to figure out why remittances are surging in some countries but not others and to explore why this surge brings both joy and fear

On-the-ground migrant experiences under economic strain and enforcement fear

Economic struggles reduce ability to remit for some migrants

H, a Honduran in California, cuts remittances[7:11]
• H is a Honduran construction worker in California who has been in the U.S. about 20 years and previously sent money home every month
• He says the economy has been "a little ugly" for him recently, causing him to stop sending money home this year
• H and his wife support themselves and their four-year-old son on his construction income, leaving no surplus to save or remit
• They are cutting expenses such as streaming services, groceries, and purchases of toys and clothes for their child

Fear of ICE and reduced work participation

Increased ICE funding and deportations[8:35]
• Congress approved a threefold increase to ICE's annual spending budget
• The Department of Homeland Security reported that more than 527,000 people have been deported so far in the current year referenced
• ICE operations are described as having a "shock and awe" quality, with masked agents making aggressive and sometimes violent arrests, many of which are seen in social media videos
Migrant fear and behavioral changes[8:54]
• Elle, a woman from El Salvador living in New Jersey, reports feeling great uncertainty when she sees arrest videos
• She says that when she leaves home for work, she is unsure whether she will make it back safely
• A Guatemalan woman in Pennsylvania has reduced her work to cleaning only for longstanding, trusted clients because she fears that working for strangers might lead to detention
• Many businesses report workers not showing up, and the Federal Reserve has cited immigration policies as a potential cause of labor shortages, especially in sectors where migrants typically work

The puzzle: Why remittances are rising despite these pressures

Intuitive expectation of falling remittances[9:52]
• Given migrants' reduced work and income and fear of going to work, the hosts say there are intuitive reasons to expect remittances to decline
Contrasting data from Honduras and neighboring countries[10:12]
• Despite those expectations, countries like Honduras, Guatemala, El Salvador, and others are seeing rising amounts of money being sent home

Manuel Orozco's investigation into remittance surge drivers

Profile of Manuel Orozco and his expertise

Background and credentials[11:04]
• Manuel researches migration and remittances at the Inter-American Dialogue, a think tank in Washington, D.C., and has been studying remittances for decades
• He has testified before Congress about remittances and helped write a federal rule to protect people sending remittances from unfair fees and fraud
• He jokes about being called "Mr. Remittance" and says people used to call him the "Remittance Rockstar"

Unprecedented size of the recent surge

Magnitude compared with historical data[11:08]
• Manuel has monitored remittance data monthly since 2002 and says he has not seen an increase of more than 20% like the current one

Ruling out standard explanations: migration and wages

Declining new migration flows[11:25]
• Typically, remittance growth is driven by more migrants arriving in the U.S., but Manuel knows that migration from Honduras and nearby countries is down
No boom in labor market or wages for migrants[11:46]
• He looked at labor market data and did not find evidence of a booming economy or surging wages that could explain the rise

Role of technology and remittance apps

Gradual improvement in remittance technology[11:43]
• In the past, migrants had to visit storefronts like Western Union, bring cash or checks, and pay fees to send money
• Now they can send money from phones via apps, still with fees but more convenient
Example of app use by Elle[12:14]
• Elle uses an app called Remitly, where she inputs her name, address, phone number, bank account, and passport number to send money to support her children in El Salvador
Why technology cannot explain sudden spike[12:47]
• The ease of sending money has improved over time rather than appearing suddenly, so Manuel and the reporters conclude it cannot be the root cause of this year's sudden surge

New remittance tax as a potential factor

Description of policy change[13:02]
• The Trump administration proposed a 5% tax on remittances; Congress ultimately opted for a 1% tax on some international transfers, set to take effect in January (relative to the time of reporting)
Behavioral response hypothesis[13:15]
• Some sources suggest that migrants may be trying to move their cash before the new tax starts, contributing to the uptick in transfers

Fear of deportation as a key explanation

Precautionary motive for sending more[13:37]
• Manuel says fear of deportation is triggering migrants to send as much as they can home in case they are deported, calling it a precautionary behavior
H's changing risk calculus[14:24]
• H says fear of ICE is affecting many of his decisions, such as no longer flying to Las Vegas for weekend trips because he does not want to risk encountering immigration agents
• He notes that previously he did not have this worry, but now is afraid even to step into an airport
Planning for possible forced return[14:54]
• H and his wife are discussing how to prepare for potential deportation, including how to send money to Honduras, buy a house, and build savings there because work is hard to find in Honduras
• He is not yet part of the measured remittance surge but intends to be when he can gather enough money, ideally sending about $500 per month
• He has recently started looking into opening a bank account in Honduras and is evaluating which bank to use and trust

Shift from consumption remittances to savings-focused transfers

Larissa's observation of more transfers going to savings accounts

Historical pattern: remittances for daily needs[15:58]
• Larissa explains that in the past, most remittances in Honduras went to relatives for essentials like groceries, shoes, and dental care
New pattern: large sums to savings accounts[16:18]
• This year, notably large transfers of $7,000 or $10,000 are increasingly going directly into savings accounts rather than to family for immediate spending
Connecting behavioral clues to fear of deportation[16:31]
• Larissa and her colleagues interpret the trend of big transfers into savings as evidence that migrants are moving their accumulated savings home because of deportation fears
• The reporters note they have heard this fear-driven explanation from people in both the U.S. and Honduras

Why the surge is uneven: Central America vs. Mexico

Remittances to Mexico stagnate or fall

Contrasting trends[16:48]
• Mexico is the number one destination for U.S. remittances, yet its remittances have been falling in recent months, unlike Central American countries seeing surges

Manuel's explanation based on migrant life cycle and legal status

Life-cycle of remittance sending[17:23]
• Manuel says the longer someone lives in the U.S., the less likely they are to continue sending remittances; he describes a life cycle of about 30 years as the maximum duration of sending
• Mexican immigrants in the U.S. have been there on average more than 25 years, placing many near the end of this remittance-sending cycle
Need for new migrants to sustain Mexican remittance growth[17:39]
• For remittances to Mexico to keep growing, more immigrants would need to arrive and replenish the "remittance funnel"
• Because immigration to the U.S. is falling, this replenishment is not happening, contributing to Mexico's declining remittance growth
Role of guest worker programs and legal status for Mexican migrants[17:49]
• Manuel notes that many more recent Mexican arrivals have come through guest worker programs and are in the U.S. legally
• He suggests they might be less fearful of deportation and thus not rushing to send money home in the same way as more precarious migrants

Central American migrants' more precarious situation

Recent arrival and legal precariousness[18:13]
• Central Americans are more likely to have arrived after 2018 and to have been in the U.S. for a shorter time than Mexicans on average
• Many came illegally or with temporary protected status (TPS), which allowed them to stay in the U.S. temporarily after disasters or unrest in their home countries
• The Trump administration removed TPS for some countries and scheduled its end for others, increasing uncertainty for those migrants
Economic impact of small increments in remittances[18:52]
• Manuel points out that even if Central American migrants just send an extra $60 every few weeks, this can add up to a significant increase in GDP and economic activity in a country like Honduras

Short-term economic benefits and celebratory reactions to remittance inflows

Immediate macroeconomic effects in Central America

Boost to GDP and consumption[18:53]
• Increased remittances mean higher GDP and more economic activity, with people buying more goods such as shoes and meat
Central banks' celebratory reaction[19:01]
• Manuel says officials at central banks in El Salvador, Nicaragua, Guatemala, and Honduras reacted to the surge in a "sort of celebratory" way

Intensified competition among banks and businesses

Proliferation of remittance-related advertising[19:30]
• Manuel notes that you can see advertisements promoting where to collect remittances all over Central American streets, with signs for companies like Western Union, MoneyGram, and Remitly in bank branches
Example of aspirational marketing[19:44]
• In one bank ad, two women gossip about someone who used her remittance money for liposuction, while they themselves talk about saving remittances in a savings account

Recognition that the surge is likely temporary

Warning of a future decline[20:18]
• Manuel warns that the current surge is likely a temporary blip and predicts that remittances are very likely to decline, perhaps substantially, in the near future
Economic vulnerability of dependence on one "commodity"[20:31]
• He argues that if remittance growth stalls, overall economic activity in countries like Honduras will be affected, emphasizing that it is dangerous for an economy to be dependent on one major inflow

Scale and developmental role of remittances in Honduras

Magnitude of remittances in Honduran economy

Recent totals and GDP share[22:54]
• As of September of the referenced year, Honduras had already received almost as much in remittances as it had in all of the previous year, nearly $10 billion
• Even before the latest surge, remittances were about a quarter (almost 25%) of Honduras' GDP; a comparison is made that the entire U.S. construction sector is less than 5% of U.S. GDP
Visibility at the Honduran Central Bank[23:17]
• On the Honduran Central Bank homepage, remittances are featured among six key indicators, listed alongside inflation and interest rates, as the total dollars logged so far in the year

Dean Yang's personal and research perspective on remittances

Personal family experience with remittances[23:32]
• Dean Yang grew up in the Philippines; his father worked abroad in Hong Kong and sent remittances home, which funded Dean and his sisters' education
• He attended an international school in Manila due to these remittances, later went to Harvard, and is now a professor at the University of Michigan
Findings on remittance-driven development in the Philippines[24:12]
• Dean has researched the impact of remittances on Philippine provinces and found that areas receiving more remittances experienced better outcomes over time
• He reports that remittances allowed households to invest in education and stimulated local economies, expanding them
• Over two decades, these higher-remittance regions became richer, incomes rose, and local economies shifted from agriculture toward more modern sectors like industry and services

Potential downsides and dependency risks of heavy remittance reliance

Concerns about dependency and political complacency

Risk of a "resource curse" analogy[24:55]
• Some economists worry high remittances can create dependency on foreign income and function like a resource curse
Possible effect on citizen attitudes toward governance[24:59]
• One concern is that remittances might make citizens more willing to tolerate poor political leadership, because family support from abroad supplies needed economic security despite bad domestic policies

Dutch disease and export sector challenges

Explanation of Dutch disease[25:35]
• Dutch disease refers to negative consequences for a country's export sector when large inflows of foreign currency (historically from natural gas in the Netherlands) appreciate the domestic currency
• As the currency appreciates, domestically produced goods become more expensive for foreign buyers, hurting exporters like manufacturers
How remittances might cause similar problems[25:31]
• Remittances, as large inflows, can similarly raise the value of a country's currency and make its export sector less competitive, potentially stunting macroeconomic development

Pain of a sudden remittance drop

Impact of a "poof" disappearance scenario[26:15]
• If remittances suddenly disappeared or shrank significantly, it would be like losing a major sector of the economy overnight, causing substantial pain
Forecasted declines given current immigration trends[26:23]
• With new immigration to the U.S. freezing and more people being deported, there are reasons to expect the current Central American remittance surge to fade
• One economist (not named in this section) projects that if immigration continues to slow and deportations continue, remittances could drop 10-13% over the next 18 months
• For Honduras, that drop would equate to suddenly losing about 2-4% of GDP

Honduran policy perspective and preparation for a remittance downturn

Economic leaders' worries in Honduras

Introduction of Ugo Noypino and his roles[27:04]
• Ugo Noypino is an economist in Honduras who formerly ran the country's central bank and served as finance minister
• At the time of the interview, he is the first vice president of the Honduran Congress and is attending World Bank and IMF annual meetings in Washington, D.C.
Discussion at international meetings[27:28]
• Ugo says a meeting about Central America, the Dominican Republic, and Panama included discussion about remittances
• Participants were told they need to prepare because in two, three, or four years, the amount of remittances will likely decline in their countries and their economies must adjust

Assessment that Honduras has relied too heavily on remittances

High poverty and consumption-focused use of remittances[27:41]
• Ugo notes that 62% of Honduras' population lives in poverty, so remittances are often used to cover basic daily needs
• He acknowledges that remittances have helped families at the micro level and reduced poverty, but argues they have not generated sufficient long-term, macro-level growth
Lack of structural reforms and investment for sustainable growth[28:34]
• Ugo says Honduras has not implemented the structural changes needed to create a sustainable growth path
• He characterizes remittances as having not been transformed into investments that lay the groundwork for future economic growth

Need to create jobs for potential returnees

Primary challenge identified by Ugo[29:00]
• Ugo states that Honduras' biggest challenge going forward is to create more employment opportunities for people who might return from the U.S.

H's long-term remittance history and uncertain future

H's contributions to Honduras and family situation

Past remittance volume[28:37]
• H first came to the U.S. at age 17 and estimates that over the years he has sent more than $60,000 back to Honduras
• He says this money has mostly gone to relatives to pay their bills
Current family and legal context[29:05]
• H is now 38 years old and has a four-year-old child who is an American citizen
• He believes that if ICE agents come to his door and detain him, or go after his wife and child, it will dramatically disrupt their lives

Living in limbo between two possible futures

Balancing present life and contingency planning[29:54]
• H is trying to maintain the life he has built in the U.S. while simultaneously preparing for the possibility of returning to Honduras

Production credits

Acknowledgment of production team

Producers, editor, fact-checker, engineer, and executive producer[31:03]
• The episode was produced by Luis Gallo with help from Sam Yellowhorse-Kessler, edited by Marianne McCune with fact-checking by Sierra Juarez, engineered by Patrick Murray, and executive produced by Alex Goldmark
Host sign-offs[31:06]
• Hosts Greg Rosalski and Erika Barris sign off and identify the show as NPR

Lessons Learned

Actionable insights and wisdom you can apply to your business, career, and personal life.

1

Large financial flows like remittances can bring substantial short-term benefits but also create structural vulnerabilities if an economy becomes too dependent on them.

Reflection Questions:

  • • Where in your own finances or organization are you heavily dependent on a single income source or client, and what risks does that create?
  • • How could you start diversifying your revenue or support base now so that a sudden drop in one source would be less damaging?
  • • What specific contingency plan could you design this month to prepare for the loss of a key financial inflow?
2

Fear and uncertainty often drive people to make precautionary financial decisions, such as moving savings or changing how they allocate money across countries and accounts.

Reflection Questions:

  • • In what areas of your life are you making money decisions primarily out of fear rather than a deliberate long-term strategy?
  • • How might you separate genuine risks from perceived ones so that your precautionary measures are proportionate and effective?
  • • What is one financial move you could make this week that would increase your resilience without being purely fear-driven?
3

Micro-level financial support, like remittances to families, can significantly improve individual welfare, but without structural reforms and investment, it may not translate into long-term national growth.

Reflection Questions:

  • • How are you currently using extra income or windfalls: mainly for immediate consumption or also for investments that build future capacity?
  • • What kinds of structural changes in your work or community could turn short-term gains into lasting improvements?
  • • Which single expense could you redirect toward an investment in skills, infrastructure, or tools that would pay off over several years?
4

The duration and nature of a relationship-such as how long migrants have been in a country and their legal status-strongly influence financial behavior over time.

Reflection Questions:

  • • How have your financial habits changed as your own life circumstances, stability, or legal situation have evolved over the years?
  • • In what current relationship or context (job, location, legal status) should you anticipate behavior changes as it matures or becomes more secure?
  • • What step could you take now to align your financial choices with where you realistically expect to be in 5-10 years rather than where you are today?
5

Policymakers and leaders need to look beyond headline economic boosts and actively prepare for foreseeable downturns in key flows like remittances or external funding.

Reflection Questions:

  • • What major external trends or policy changes could significantly alter the resources your organization, team, or household relies on in the next few years?
  • • How might you use a period of relative abundance to invest in capacity, diversify income, or build buffers for leaner times?
  • • What concrete scenario-planning exercise could you complete this quarter to map out how you would respond if a critical revenue stream declined by 10-20%?

Episode Summary - Notes by Hayden

The remittance mystery
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