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Remesas y Venezuela, el nuevo petróleo
26 de March de 2021
The financial fear of running out of money in retirement
El miedo financiero de quedarse sin dinero en el retiro
9 de April de 2021
image
Remesas y Venezuela, el nuevo petróleo
26 de March de 2021
The financial fear of running out of money in retirement
El miedo financiero de quedarse sin dinero en el retiro
9 de April de 2021

Remittances and Venezuela, the new oil

70% of the elderly population in Venezuela lives thanks to remittances

Traditionally, when people talk to us about remittances, our minds automatically think of countries like Mexico and El Salvador, and the reasons are very simple:

  • Every year, Mexicans send more than 40,000 million dollars to their country from the United States.
  • While Salvadorans in the USA send some 4,500 million dollars, but this represents 21% of their Gross Domestic Product.

Now, when we compare the effect that remittances are having in Venezuela, we see that between 4,000 and 3,500 million enter annually.

The effect of remittances on the economy represents 22% of Venezuela’s gross domestic product for the year 2020.

Credits: Magisto

Venezuela will be in the top leagues of remittances worldwide

The pandemic has had a negative effect on the amount that people can send, especially in the case of Venezuelans.

We Venezuelans are a relatively new population within the world of emigrants and the type of work they managed to obtain was one of the most affected.

The World Bank estimates that remittances worldwide will drop by 20%, which also affects the amount that Venezuelans send, which has a devastating effect on the finances of 35% of Venezuelan families who depend on these incomes.

Credits: Magisto

Immigrant Venezuelans prioritize remittances

Of course, the situation for the Venezuelan who is abroad is extremely hard, knowing that his family depends on these remittances.

But their personal finances, in some cases they cannot pay the rent and in the other they do not allow them to send money to their relatives.

On the other hand, the systems for sending these remittances are not efficient and it is very expensive, being exposed to exchange movements and in some cases even at risk of fluctuations of cryptoactives since they are also made through these channels.

Credits: Magisto

Let’s see what are the averages of the amounts that Venezuelans remit according to a report carried out by The Dialogue in May 2020, to more than 800 people:

  • From USA, annually $3,000 or monthly $250
  • Spain, annually $2,400 or monthly $200
  • Colombia, annually $450 or monthly $38
  • Ecuador, annually $400 or monthly $33

Undoubtedly there is a titanic effort in sending these amounts of money and it is a reality that remittances are here to stay.

The second most important source of money inflows for Venezuela are “remittances”, which is why we call them “the new oil”.

The experience of countries that have a migration trajectory greater than that of Venezuela shows us that most of them are gradually improving their personal finances.

Consequently, it allows them to support their relatives with larger amounts, providing greater financial well-being. 

Even in the case of Mexicans in the USA, in the midst of the pandemic, they managed to increase their remittances by 35% in the month of March.

Of course, this amount had an impact in part due to a devaluation of its currency, it undoubtedly shows a population with better incomes that was able to support their families.

Credits: Magisto

Conclusion

A better tomorrow is possible, but as your income goes up, our suggestion is that your finances be stronger:

  1. It is important to have an emergency fund that covers at least 6 months of your monthly expenses, which will serve as a protection policy against unexpected situations.
  2. Do not put aside saving for your retirement, the only way to break this circle of poverty is that tomorrow you are not a financial burden for your children and achieve independence.
  3. If you are in the United States, it is essential that you learn what an IRA (Individual Retirement Account) is, which allows your money to grow for your retirement without paying taxes.

As they say on airplanes: put on your oxygen mask first, so you can help someone next to you in case of depressurization.

Fuente: The Dialogue (Manuel Orozco, Kathryn Klass), Econoanalítica, Banca y Negocios, y cálculos propios.

Alonso Rodríguez Segarra
Alonso Rodríguez Segarra
Founder & CEO Advise Financial advise-financial.com Alonso Rodriguez Segarra is a “CERTIFIED FINANCIAL PLANNER™” named by Investopedia among the Top 100 Financial Advisors in the USA  with more than 20 years of experience. His specialty is helping those people who want to plan for their retirement or optimize their retirement, with Hourly Financial Planning always looking for the best for his clients, under fiduciary criteria.

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