NEW remittance regulations in Florida, requiring senders to show proof that they are not undocumented immigrants, could pose challenges for Jamaica’s economy by potentially reducing transaction volumes and shifting some remittance flows to informal channels, according to economists.

With remittances contributing close to US$3 billion annually — 80 per cent of which originates from the US — the changes may impact businesses and households that rely on these funds, though Jamaica’s economic buffers and ongoing digital adoption in remittance services could help mitigate the effects.

Adrian Stokes, financial economist and CEO of Quantas Capital, said the potential fallout “will be fairly material”, but added that the net international reserves (NIR) could provide a temporary buffer.

“It is too early to enumerate the exact impact that could arise from a fallout in the remittance market. A major plus is that Jamaica’s NIR is over US$5 billion, which provides an important buffer to any short term negative shock in remittances.”

Stokes however said if any decline in remittances is prolonged it “will force a policy response to ensure Jamaica’s balance of payments remains sustainable.”

Keenan Falconer, an economist, shared similar sentiments about the likely fallout if Jamaicans, especially those in Florida, choose to stay away from sending remittances to their families back home in Jamaica.

“I think it will have a material impact in the sense that remittances are the second highest foreign exchange earner for Jamaica…and since this programme applies to Florida, which has a high concentration of Jamaicans, then that would affect the remittance figures, particularly as remittances have started to decline and normalise to pre-pandemic levels.”

Data up to October 2024 from the Bank of Jamaica (BOJ) show US$2.4 billion in remittances entered Jamaica. For all of 2023, the last full year for which data are available, the inflows reached US$2.92 billion. That was lower than both the flows for 2022 and 2021 — the two best years for remittance inflows into Jamaica at with 2022 recording US$2.95 billion and 2021 being the best year for remittance inflows at just over US$3 billion.

According to data provided by Market Research Services Limited, about 28 per cent of Jamaican households receive remittances regularly, though that portion has declined from 38 per cent in 2016. Most of those who receive remittances use it to meet their daily household needs.

“So if you have a significant reduction in the number of people who are sending remittances to Jamaica, the remittance inflow obviously to Jamaica will go down, and that will have a domino effect in terms of the people’s ability to meet their daily household expenditure, which of course already has been challenged by high prices. So that’s a problem that we face,” Don Anderson, chairman and CEO of Market Research Services Limited, told Jamaica Observer.

“It will further accelerate the challenges that people who are receiving remittances have, and that’s a significant percentage of the Jamaican public,” he added.

Falconer tried to capture the fallout.

“If you have a one percentage point decline, which translates to around $4.5 billion, you are taking that essentially out of the hands of people directly, because unlike other jurisdictions, the Jamaican Government does not tax remittances, so it goes directly into people’s hands.”

Still he said Jamaicans may find creative ways to send remittances back, as he warned, remittance companies such as Western Union and Moneygram may be hard hit, depending on the level of the fallout.

“Remittance companies might feel some of the fallout, since persons, while they won’t be able to send it legally via official channels, they could ask people to act on their behalf as agents to send remittances via other means. So there are other digital platforms and online platforms that you could send remittances, people could send remittances via cash-in-hand, but the informal remittance channels might be utilised more now. So persons might ask persons who are documented to be able to send those remittances through these channels. So I expect it will have some effect, at least on the remittance companies.”

Jacinth Hall Tracey, managing director of Lasco Financial Services, however, said she is in watch-and-see mode, assessing the likely impact the action of cracking down on illegal migrants could have on remittance flows to Jamaica. Lasco Financial is one of nine primary remittance agents in Jamaica. Hall Tracey said the key to knowing how the fallout will impact the company will be knowing how many Jamaicans are undocumented in the United States in general and Florida in particular.

“It’s difficult to measure the impact, but we’re definitely concerned because there will be impact. Given the size of contribution to GDP and the number of remittance companies,” Hall Tracey said.

“We’re awaiting meetings, but I can tell you everybody is just trying to assess what’s going on. Globally, remittance companies are trying to figure out how to navigate this particular context,” she said when asked how her global partners are viewing the development.

But, she pointed out, the impact is hard to assess given people are turning more to digital means since the COVID-19 pandemic.

“Most of it is digital. So, the cash part is Jamaica, which is more hardcore cash, but the origination [senders] are mostly, and when I say mostly, [I mean] more than 50 per cent digital.”

“Yes, it’s been shifting and accelerated by COVID. So, the senders have fully adopted the digital mode, but the problem. I don’t think it’s just cash that would just be affected.”

“Anybody who was undocumented that is sending will probably not send by the normal means. They might send [money] with someone coming [to Jamaica].”

— David Rose contributed to this story.