El Salvador’s Top Central Banker: Return Of TPS Holders Will Help Our Economy

Will Racke | Immigration and Foreign Policy Reporter

The Trump administration’s decision to phase out temporary protection from deportation for Salvadoran illegal immigrants was denounced by immigration activists in the U.S., but El Salvador’s top central banker says it could lead to big economic benefits for his country, one of the poorest in the Western Hemisphere.

Last week, the Department of Homeland Security announced that roughly 200,000 Salvadoran nationals living in the U.S. are no longer eligible for a humanitarian program known as Temporary Protected Status (TPS). The Salvadoran TPS beneficiaries have until September 2019 to return to their home country or apply for another immigration status for which they may be eligible. (RELATED: Trump Admin Winds Down Temporary Protected Status For 200,000 El Salvadorans)

Returning TPS holders are likely to boost El Salvador’s economic performance because their labor productivity and educational attainment are much higher than the national average, according to Oscar Cabrera, president of the central reserve bank.

“In the case of the returning migrants from the U.S., the beneficial effects that impact the American economy would transfer in the long term to the economy of El Salvador, with those higher-skilled Salvadorans,” Cabrera said Friday, according to Salvadoran newspaper Diario El Mundo.

Cabrera’s assessment diverges sharply from that of many immigration activists, who argue that El Salvador’s economy will suffer if remittances from Salvadoran nationals in the U.S. decline as they return to their home country. In 2016, El Salvadorans living abroad — mostly in the U.S. — sent back $4.57 billion in remittances, or about 17 percent of the country’s entire economy.

Even with the prospect of reduced remittance flows, Cabrera believes the return of El Salvadorans from the U.S. will be a net positive in the long run. That’s because Salvadoran nationals living in the U.S. are now more highly educated than they were a generation ago. In 1980, just 16 percent of Salvadoran migrants in the U.S. has a high school education, but that figure has grown to about 39 percent in recent years, according to Cabrera.

“We see then a brain drain,” he said, but this time toward El Salvador.

Some Salvadoran economists doubt that Trump’s decision will cause remittances to decline sharply, even though about one in five senders of money to El Salvador from U.S is a TPS beneficiary, according to a central bank survey. Carlos Pérez, an advisor to Salvadoran think tank FUNDE, says losses from returning TPS beneficiaries will be offset by remittances from non-TPS Salvadorans in a growing U.S. economy.

“The American economy has grown in recent years,” Perez said, according to El Mundo. “We won’t see a drop in remittances, perhaps a drop in the rate of growth, but it’s not a substantial impact that strongly affects the economy.”

El Salvador has been a TPS-designated country since 2001, when former President George W. Bush approved temporary protections in response to a series of devastating earthquakes. Though TPS was intended to be a short-term humanitarian program, successive administrations extended protections to El Salvador on the basis of other natural disasters and poor economic conditions there.

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