Central America braces for remittance shock as TPS expires
The expiration of temporary protected status (TPS) for El Salvador and Honduras has created deep uncertainty for hundreds of thousands of migrants in the United States, while also threatening the financial stability of Central American economies that depend on remittances. El Salvador’s TPS designation lapsed on September 9 without a formal renewal, though the status remains extended by default due to missed procedural deadlines. Honduras’ TPS was terminated in July 2025, but a federal judge later blocked enforcement of that decision. According to the World Bank, remittances account for 27.5% of El Salvador’s gross domestic product and 30.1% of Honduras’, making them critical to economic survival in both nations.
For El Salvador, the delay in a renewal decision has introduced legal ambiguity. The Department of Homeland Security failed to meet the statutory deadline for publishing its renewal ruling, leaving the program’s continuation in limbo. Alejandro Kaffati, an economic analyst, clarified that this is not a substantive policy change but rather a procedural oversight. The U.S. government maintains that El Salvador’s security conditions have improved, despite the country’s state of exception, which has resulted in over 93,000 arrests—primarily of young men—since March 2022.
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Honduras now faces a more defined but still uncertain legal path. The U.S. initially ended TPS for the country in July 2025, but a federal judge temporarily halted the termination. However, a June 2026 Supreme Court decision in related cases has narrowed the scope of judicial review, leaving Honduran migrants in legal suspension.
The U.S. has ruled out further extensions, despite appeals from President Nasry Asfura, who emphasized the economic risks in an August press conference. Asfura said in an August press conference that they are exemplary citizens who work hard, have adapted, and have respected American laws. He said, “We have to prepare, we have to welcome them here, if that is the case, to open our doors to them.”
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While mass deportations remain unlikely due to enforcement difficulties and incomplete records, the loss of TPS and work authorization would force thousands into informal employment sectors. Central America, including El Salvador, Honduras, and Guatemala, is projected to receive over $51.6 billion in remittances this year. If 55,000 to 70,000 Salvadorans and Hondurans reduced or halted remittances, the financial impact could range from $334 million to $425 million, equivalent to 0.5% to 1% of GDP, according to Kaffati. Though manageable, such a reduction would strain economies already reliant on these transfers.
A May Honduran law seeks to ease reintegration and protect migrant assets, but its success hinges on cooperation between private investors, government policies, and stable institutions. Kaffati said that remittances have served as a substitute for employment policy. He said that for 25 years, the economy exported workers rather than creating jobs. Over 3 million Hondurans depend on remittances, and a sudden disruption would leave little time for adaptation.
