For Central Americans, Biden’s Spending Could Spark a Boom

CAJOLÁ, Guatemala—Jacinto Diaz, 42, walks through a back room packed with bags of cement mix and into the bustling hardware store he opened 22 years ago when he returned to Guatemala after years of working in the United States.

Outside, in the small Guatemalan town of Cajolá, hammers bang and electric saws slice through wood, slowly building the intricate and colorful homes that make up much of rural Guatemala. As Diaz answers his phone, customers carefully examine patterned floor tiles in the corner while others ask his wife behind the counter about screws and tubes in a mix of Spanish and their native indigenous language, Mam.

Everything here, from the very business Diaz stands in to the half-finished houses outside, was constructed by remittances—money sent home from Guatemalans who have migrated to the United States.

“There’s not a single person here that can just build a home,” he said. “Remittances are the things that do it. Everyone here depends on the remittance, whether it be a butcher, anyone with a business, drivers, everyone.”

Jacinto Diaz poses in his cement and tile shop in Cajolá on Dec. 13, 2021. Megan Janetsky for Foreign Policy

During the pandemic, remittance payments from migrants have almost consistently broken records month to month in receiving countries. In Guatemala alone, such transfers have more than doubled, going from $747 million in March 2020 to an all-time record of $1.51 billion in December 2021, data from Guatemala’s central bank shows.

So while the country’s economy, like much of the developing world, is still slammed by the pandemic, towns such as Cajolá are booming. And the economic bond that has tethered the United States and Central American economies for decades is only set to grow. The United States currently faces a massive labor shortage, and the Biden administration is investing half a trillion dollars to rebuild America’s roads and bridges. Which means much of that infrastructure will be built by a mostly migrant workforce.

As U.S. President Joe Biden sets his sights on “building back better,” he may also inadvertently be building up large swaths of rural Central America.

Construction worker Brayan Vasquez carries wooden planks through the bare bones of a house he is building in Cajolá on Dec. 13, 2021. The owner of the future home migrated to the United States and sends remittance payments back to pay for construction. Megan Janetsky for Foreign Policy

Over the decades, Mexican migrants were the ones continually filling labor shortages: manning construction sites, tending to crops, and working in factories—jobs most Americans didn’t want, explains Andrew Selee, the president of the Washington-based Migration Policy Institute. “When the U.S. labor market is strong, as it is now, the legal migration streams have rarely kept up with the demand for labor,” Selee said.

As Mexican migration slowed in the 1980s and ’90s, Central American migration began to pick up, spurred by civil wars in Guatemala and El Salvador. Migrants such as Diaz, who arrived in the United States in 1999, were the ones filling those gaps. As a teenager, he migrated from his home in Guatemala’s western highlands to work in construction and manual labor in Maryland. And like many of the estimated 3.8 million Central Americans currently living in the United States, he sent remittances home over the course of his 11 years abroad.

In rural receiving towns, that money ripples. As remittance payments rolled in, colorful and intricate houses began to pop up over large areas of rural Central America. With it, new economies were born.

Diaz dreamed of building a home and his own business, and he invested the money he earned in the United States to sell cement, floors, and tools to families like his building their homes. “My idea was to save money and think of the future,” he said. “When I began [my business], it was just me and another guy. Now we have 12 people working for us.”

But the opposite happened, said Ubaldo Ramirez, a researcher who studies remittances for Guatemala’s University of San Carlos. “Family members working in the U.S. got worried about their families here and sent more remittances,” Ramirez said. “Perhaps even more important is that, now, many people continue going to the United States. That migration hasn’t been cut off.”

That cash flow has been a lifeline for people such as 26-year-old Lucia Arecely Vail. Vail’s husband migrated to the United States to work in construction seven years ago after their baby fell ill and medical bills threatened to economically ruin their family.

Lucia Arecely Vail brushes back her 8-year-old daughter’s hair in Cajolá on Nov. 29, 2021. The toys piled in the corner of the house were bought with remittance money. Megan Janetsky for Foreign Policy

When he began to send money, it changed everything, she said, sitting behind the sewing machine she uses to embroider traditional Indigenous clothes that she sells at the local market. “Our living conditions got better when he migrated,” Vail recalled. “Before, our little girl would get sick, and we wouldn’t know where we’d get the money to take her to the doctor. But when he arrived [in the United States], he’d be able to send us money, so her life completely changed.”

They began to build their own bright blue home in the hills above Cajolá, where her now 8-year-old daughter plays with a pink plastic toy car. Vail was able to buy meat twice a week for meals, she said, something she’d never been able to do before.

When the pandemic hit, she wasn’t able to sell her clothes. Her husband, out of work, stopped sending money the first two months of the pandemic. Soon, though, he slowly began sending again, and remittances became the only thing keeping their family afloat. Two years in, as the region continues to face a pandemic-induced economic crisis, her work still hasn’t bounced back.

“There was nothing, and no one would buy any clothes anymore,” Vail said. “All we had were the remittances.”

Despite heightened migratory barriers and visa caps, labor by migrants—both documented and undocumented—is almost certainly going to play a crucial role, Selee said. “The U.S. government is not going to hire people who don’t have legal residence in the United States,” Selee said. “But there will be lots of subcontractors-of-subcontractors who hire people who are in the country without documents.”

Diaz said that money would go a long way back home in Cajolá. “With more remittances coming, people invest more,” Diaz said. “They construct, they buy from us, they buy everything. The more people working in the United States, the more remittances will come.”

It wouldn’t be the first time U.S. domestic development programs had such a ripple effect.

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When New Deal programs and World War II production pulled Americans into higher-paying city jobs, it resulted in a labor shortage in farming communities. The solution was the 1942 Bracero Program. Over the course of two decades, the program gave temporary work permits to millions of Mexicans fieldworkers, whom then-U.S. President Franklin D. Roosevelt said were “contributing their skill and their toil to the production of vitally needed food.”

Others have drawn parallels to the 2011-2012 remittance growth from economic recovery programs the Obama administration implemented in response to the 2008 economic crash. “One of the effects of economic recovery in the U.S. was an increase in foreign labor, and that’s where you start seeing increases in remittances,” said Manuel Orozco, the director of the Inter-American Dialogue’s Migration, Remittances, and Development Program, though he noted that what we’re currently seeing is unprecedented.

Even Trump-era stimulus checks boosted remittance flows, as the U.S. economy bounced back while economies in receiving countries contracted.

Lucia Arecely Vail sews traditional Guatemalan clothes as her daughter runs into their home in Cajolá on Nov. 29, 2021. Megan Janetsky for Foreign Policy

The Biden administration has called addressing the root causes of migration in Central America “critical” to its immigration policy, proposing economic investment projects and an anti-corruption agenda.

But such policies have met with criticism and skepticism that they’ll effectively address realities on the ground. Breda said the effects of such measures will only be felt in the long term and that it’s unclear “how to turn [the anti-corruption plan] into real action.”

Previous anti-corruption efforts in the region have “fallen short,” he said.

He and the Migration Policy Institute’s Selee both said the key is to find a mechanism to turn remittances—which are often used for consumption and basic needs—into local investments similar to the one Diaz has made that provide economic alternatives to migrating. Diaz, for instance, said he doesn’t want his 9- and 20-year-old sons to migrate.

“Remittances can do a lot to help people get ahead, but there has to be some capacity to turn remittances into investments in education, health care, and business development on the other side,” Selee said.

One solution Selee noted was a Mexican program funded by the Inter-American Development Bank called the 3×1 Program for Migrants, which matches remittance payments if they’re used to invest in local communities.

But some, such as former migrant Eduardo Jimenez, worry about the consequences of an overdependence on remittances.

María Vail weaves a traditional Indigenous Mayan fabric in a textile-creating program in Cajolá on Nov. 29, 2021. The program is meant to provide rural Guatemalans with economic opportunities so they don’t have to migrate. Megan Janetsky for Foreign Policy

Jimenez, who migrated to the United States at 15, formed Grupo Cajolá, a set of economic projects aimed at creating job opportunities for young Guatemalans who would normally migrate. On any given day around the town, groups of women weave intricate fabrics sold in markets and internationally as part of these projects, and men in Jimenez’s carpentry workshop build doors and cabinets that will be installed in one of the many remittance-funded homes speckling Cajolá.

Money sent from the United States has made a positive impact on his community and even on his own project—but has also brought its own problems.

The economic tether to the United States often creates what experts call “remittance economies.” Prices in migratory towns go up as dollars roll in. Those who don’t receive the payments get priced out and are pushed to migrate to keep up. It creates a cycle in which migration fuels more migration. As a result, some towns empty out. Remittance earners send money to build their houses for the day they return home but continue working in the United States. Even in booming Cajolá, large parts of the town sit empty.

At the same time, Jimenez said people often don’t think of investing in the future past their home and have lost hope of their own government improving. They no longer “fight for their rights,” he said.

“People don’t have any hope anymore. We’re only living in the moment, awaiting a remittance, awaiting the day that we’re going to migrate,” Jimenez said. “And they’ll go. So the poverty is just going to continue because the same politics that have always run this country will, too.”

But for many remittance receivers like Vail, it’s hard to think past the day-to-day. Though she receives money from her husband in the United States, it has been hard for him. Work has fluctuated, and while he sends as much as he can to pay bills and food, inflation has caused food prices to jump back home in Guatemala.

Vail and her husband had hoped he could return home from the United States after he earned enough to finish building their small home. But the family had to stop construction after burning through their savings at the beginning of the pandemic. It sits half-finished: Where a roof or more rooms would be, piles of corn sit on a slab of concrete and metal rods, roasting under the bright sun of the western highlands.

“He said we’ll have to wait,” she said, standing at the top of her house and peering down where her daughter played on the ground below. “But for the sake of our girl, I hope he can come home soon.”