Mexican President Claudia Sheinbaum has called the bill “unacceptable” and vowed to negotiate with the US. “We don’t want there to be a tax,” she said at a press conference. “We’re going to keep working so there is no tax on the remittances our compatriots send to their families in Mexico.”

Over 80% of remittances from the US to other countries are used for consumption, especially daily groceries, health, housing, and education; and any tax would adversely affect the receiv- ing country’s economy. A report by the Inter-American Dialogue warned that the tax could lead to a 7% decrease in remittances, impact trade, increase migration, and reduce control over foreign currency transfers.

Latin America and the Caribbean received $160.9 billion in remittances in 2024, with Mexico alone accounting for $64.7 billion. In the Central American Northern Triangle of El Salvador, Guatemala, and Honduras, heavily represented among undocumented persons entering the US, remittances make up 20% to 27% of national GDP. The tax would cost the three countries almost $2 billion a year, based on 2024 figures.

Honduran Deputy Foreign Minister Antonio Garcia described the tax as “a bucket of cold water” for Honduran migrants.

Caribbean governments have pointed out that the bill threatens to lower international reserves of dollars. This has been a long-term problem in the region and has prompted some credit card issuers to lower limits to $100 for new applications.

The bill has until September 30 to pass and could face legal opposition over provisions that affect vulnerable communities and international treaties. Proponents suggest that the tax gives the US a slice of the estimated $905 billion remittance industry. A remittance tax would not be unprecedented, however. Oklahoma imposed the first state tax on international transfers—1% on every $500 sent—in 2009.

“Like many emerging markets, Latin America is a hotbed of financial innovation,” said Tripathi to Costa Rican newspaper La República. “In fact, some of the most cutting-edge developments in global banking originate [in Latin America]. These aren’t just regional success stories, but global benchmarks. Latin America is leading by example, and the world is paying attention.”

Tripathi cited two examples: Nubank, which started in Brazil and has spread to Colombia and Mexico. Nubank passed 100 million customers in May 2024 and has a market capitalization of $56.6 billion. Meanwhile, the Central Bank of Brazil’s Pix payment platform has transformed the nation’s instant payments system with more than 155 million users, 15 million companies, and over 6 billion transactions monthly. In 2024, Pix had a 53% year-on-year growth and surpassed credit card transactions.

However, Tripathi warned that more than 50% of the total capital invested in the world banking sector is trading below its value. This suggests that banks are not generating enough returns to cover capital costs, which in turn means they cannot enact societal transformation.

“We are on the verge of a banking revolution that will redefine how banks operate, how they serve society, and how they build trust,” he added.

In March, Brazilian bank Itaú unveiled instant global payments, and the latest unicorn in the region is Mexican digital bank Plata, which raised $160 million in Series A funding led by New York-based Kora that valued the two-year-old company at $1.5 billion.

Bolivia, Chile, and Ecuador have fielded projects ranging from financial inclusion to client experience, which won awards during the Fintech Americas Miami conference in March.

Other regional entities that received multiple awards include Grupo AutoFácil, BAC, Banco Atlántida, BBVA, BCP, Citi, Davivienda, and Santander.

BVES claims it is the first regional stock exchange to establish a platform dedicated to the custody, issuance, management and trading of digital assets.

Rolando Duarte, president of BVES, said in a statement, “With Digital Exchange, we position ourselves at the forefront of financial innovation. Our mission is to provide market participants and local and international investors with a transparent and accessible platform that reflects the future of global finance.”

El Salvador has forged ahead with a plan to modernize finance in the region. It has recognized Bitcoin as legal tender (although this has since been rescinded), offered to headquarter a Central American stock exchange and crypto firm Tether, and drafted specialist legislation for alternate financial vehicles.

BVES acknowledges the assistance of Koibanx, which specializes in tokenization and blockchain infrastructure. The 2022 Digital Asset Issuance Law is the basis for the 39 registered asset providers in the country.

One of the first tests for Digital Exchange will be the tokenization of the Guatemala Interoceanic Consortium. Using the COINGT digital asset, the group wants to finance $325 million to unite the Atlantic and Pacific oceans, which will be achieved via ports, rail and a multimodal transport megaproject. The finance will be used in two tranches to pay for land acquisition, move the current plot owners, and pay suppliers. Ultimately, the consortium hopes to have a 231-mile property from Jutiapa to Ciudad Barrios.

“We are paving the way toward a digital financial ecosystem,” says BVES executive director Valentín Arrieta, “Digital Exchange opens the doors to new financial opportunities, connecting companies, institutional clients, and natural investors with the possibilities offered by digital assets, positioning the Exchange as a leader in innovation in the region.” According to a CNAD report, more than $5 billion in digital asset issuances were approved in 2024.

Scotiabank has officially exited retail banking in Panama, Costa Rica, and Colombia, marking the latest move by a major international lender to scale back in the region. The deal, which gives Scotiabank a 20% stake in Banco Davivienda in exchange for its retail operations, highlights a broader trend as mounting compliance costs, de-risking pressures, and shifting profit priorities drive global banks to rethink their presence in Latin America and the Caribbean.

Scotiabank’s exit also fulfills a promise CEO Scott Thomson made in 2023 to refocus on more profitable North American markets. The decision marks the end of a more than decade-long expansion that initially defied the de-risking trend. In 2012, Scotiabank made a bold play for Colombia’s growing financial sector, acquiring a majority stake in Banco Colpatria for $1 billion. It continued its push into the region in 2016, purchasing Citibank’s retail operations in Costa Rica and Panama for $360 million.

But while Scotiabank was expanding, many global banks were already reassessing their footprint in high-risk markets.

“As large international banks that provide payment services to the region face tougher compliance measures, many have made a cost-benefit decision that the material compliance costs from doing business in the region far outweigh the benefits,” says Adrian Stokes, CEO of Quantas Capital in Jamaica. “Therefore, it makes good business sense to stop offering correspondent banking services to regional banks.”

The shift has accelerated in recent years as exiting banks cite a combination of rising compliance costs and concerns over anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. The US Treasury, the European Union, and the intergovernmental Financial Action Task Force (FATF) have deemed certain markets high risk, making operations more costly. Heightened capital requirements, introduced after the 2008 financial crisis to prevent taxpayer-funded bailouts, have further contributed to the de-risking trend.

Latin America and the Caribbean have been hit hardest, with the former losing an average of 30% of its correspondent banks, according to a 2020 report by the Bank for International Settlements. The Bahamas, Belize, Dominica, Jamaica, and St. Vincent and the Grenadines all lost at least 40% of their correspondent banks between 2011 and 2020, with Trinidad and Tobago landing just below that threshold.

The banking pullback has limited access to international finance and credit in regions heavily reliant on remittances, worth 20% to 27% of GDP in Central America, and tourism, which accounts for up to 90% of GDP in some Caribbean nations. In 2022, tourism provided 1.8 million direct jobs and generated an estimated $62 billion for the Caribbean: close to half of the $136 billion in GDP the International Monetary Fund estimates for the region for 2024.

A dearth of correspondent banks reduces access to international finance and credit, increases the transaction cost of cross-border payments, and delays innovation, such as hotels’ attempts to go cashless. For clients, the effects can range from reduced access to trade finance, issues with clearing checks and foreign money transactions, and heightened dollar supply concerns in some countries.

Over the decade since HSBC was fined $1.9 billion for laundering cartel money in Mexico, other banks are still being investigated, including Wachovia and TD Bank, which were fined a record $3 billion last October by the US Treasury Department’s Financial Crimes Enforcement Network.

“The same issues in Central and Latin American markets are magnified in the Caribbean,” says Christopher Mejia, emerging markets sovereign analyst at T. Rowe Price. “Operating costs have to include natural disasters in a more difficult environment than in Central America, and [with] much smaller profits to be had. Banks now take into account reputational risks from privacy laws and rules, especially after the Panama Papers [scandal].”

De-risking has also impacted money transfer organizations (MTOs) such as MoneyGram, PayPal, UAE Exchange, and Western Union. Many have made similar decisions to de-risk from the region.

While Scotiabank will retain its commercial banking operation in Colombia, it serves primarily as a relationship management hub for large private companies looking for international banking advice.

“This is a meaningful shift in how we allocate capital,” Thomson told a media roundtable in December 2023, referring to Scotiabank’s plan to focus on more profitable North American markets. “The return profile of the international bank has not been commensurate with the risk, and it’s been a drag on overall returns.”

For customers in the Caribbean and Latin America, the shift amounts to a localization or domestication as the international banks’ operations are picked up by local banks or by large conglomerates in the region.

Bancolombia and Grupo Aval, which together own Banco de Bogotá and the BAC group in Central America, were one and two in their local market until the Scotiabank and Banco Davivienda deal. They have grown substantially in Central America, having acquired Banco Reformador (Grupo Financiero Reformador) in Guatemala for $411 million in 2013. The same year, Bancolombia acquired 40% of Banco Agromercantil, also in Guatemala, for $217 million.

Solutions to de-risking that would keep global payers in the region are not obvious, however. For global banks pinning their hopes on technology as the solution to operational cost and regulatory issues, blockchain and fintech still face the same issues as traditional banks. Neobanks have made a strong push into Mexico, especially Brazil’s Nubank, as have non-traditional financial institutions like Argentina’s Mercado Libre and Ualá. The latter are among roughly 50 firms awaiting verification by the National Banking and Securities Commission (CNBV); the process can take at least 12 months, and is notorious for delays.

The Caribbean is finding its own potential solution in central-bank stable coins, such as the Eastern Caribbean digital currency DCash. But laws are still being put in place across the region’s assortment of jurisdictions and defensive countermeasures to cyberattacks are still insufficient. Cyberattacks are still nascent in the region, so users have not faced the volume that other parts of the world have. A second concern is a brain drain from the region, an International Information System Security Certification Consortium survey in 2021 suggested Latin America needed 530,000 more cybersecurity professionals. “There is no silver bullet to the compliance challenges the region faces,” Stokes argues. “The only sustainable way to solve this issue is for the region to work in unison to improve controls around AML/CFT issues.”

Some governments in the region blame the de-risking trend on inconsistency and shifts in rulemaking by the US Treasury, FATF, and the EU. Added to these issues is the time lag between countries passing laws—that banks then comply with—and the delay in removal from watch lists for months afterward. Some Latin American and Caribbean countries say this amounts to bullying by more developed countries.

Last fall, President José Raúl Mulino of Panama and others warned that companies from countries that did not update their tax haven lists would not be considered for state contracts. Given that the $6 billion-$8 billion, high-speed Panama-David railway project is up for bid, this is not an empty threat.

“Our country divestment program is now over,” said CIBC Caribbean’s CEO Mark St. Hill, in a statement. “These were some very complex transactions, and it is a credit to [CIBC’s team’s and buyer banks’] expertise and professionalism that we were able to complete all of them within the timeframe that we set out and with relative ease.”

Operating as CIBC FirstCaribbean in the Dutch Caribbean, the bank’s reduced regional footprint has resulted in a modern, slimmed-down bank, St. Hill added. Changes included centralizing key functions, including digital sales through LoanStore; launching an agile work plan; and revamping its call centers into contact centers.

Parent CIBC has been refocusing on its core markets to accelerate growth. The ownership changes are subject to local banking regulatory approval, which is expected in the forthcoming months.

“Acquiring CIBC FirstCaribbean’s banking assets presents an excellent opportunity for Orco Bank,” says Edward Pietersz, Orco managing director and CEO. “With an expanded reach, we are well positioned to fulfill our mission of being the preferred partner, offering innovative, customer-driven solutions that enable financial freedom in a responsible and sustainable manner while creating shared value for our communities.”

A similar effort to de-risk the region by National Commercial Bank Jamaica with the sale of its Cayman Islands subsidiary NCB Cayman has fallen through. The transaction failed to be completed within the agreed timeframe, parent NCB Financial Group revealed. But rumors persist that other international banks are considering selling some of their Caribbean assets due to poor performance and high compliance costs in the region.

As part of a $1.4 billion loan agreed with the International Monetary Fund in December, the government’s involvement with the digital Chivo wallet will be “gradually unwound.” At the end of January, on a vote of 55-2, El Salvador’s Legislative Assembly passed modifications to the Bitcoin law, eliminating the word “currency” but keeping it legal tender. The changes will take effect May 1, 90 days after the legislation appeared in the official newspaper.

“Bitcoin no longer has the strength of legal tender,” economist Rafael Lemus told AFP. “It should have always been that way, but the government tried to force it into existence, and it didn’t work.”

Users are now free to accept Bitcoin or not, but it cannot be used to pay taxes or state bills. President Nayib Bukele admitted that introducing Bitcoin as an official currency alongside the US dollar in September 2021—the world’s first such move—had been his government’s “most unpopular” measure, alongside stringent anti-gang security measures.

El Salvador still has 688 Bitcoin in reserve, worth an estimated $574 million, of which $287 million is profit.

On February 13, Bukele and Microstrategy Executive Chairman Michael Saylor discussed how Bitcoin adoption could be accelerated worldwide, with El Salvador’s National Bitcoin Office considering establishing nodes in each household. The aim was to boost public perception of how Bitcoin can work in daily settings.

“President Bukele continues to buy Bitcoin, we have a Bitcoin Office, we have the Bitcoin Law, Bitcoin can be used in El Salvador,” El Salvador’s ambassador to the US, Milena Mayorga, assured at a Bitcoin conference.” But, “it has not been an easy road.” A survey published by the Jesuit Central American University in January revealed 92% of Salvadorans had not used Bitcoin in 2024. Of the 8% who said they had done so, the average was only 14 times a year. Family remittances via digital wallets amounted to $7.22 million in December 2024, less than 1% of the total sent.

Between the two banks, they will have over 27 million clients in the region and will be the second largest institution in Colombia behind Bancolombia and ahead of Banco de Bogotá. However, they will pass Bancolombia for the largest number of credit cards in the country with 3.8 million. It is the largest transaction in Colombia’s banking sector in recent years. At current exchange rates, 20% of Banco Davivienda is worth around $417 million.

“With this agreement, we advance our execution plan towards sustainable and higher returns across our International Banking markets,” said Francisco Aristeguieta, Scotiabank’s head of international banking in a statement.

Rumors of the deal started in November 2024 as Scotiabank looked to continue CEO Scott Thomson’s plans to refocus on core markets, especially in North America. However, they will continue to service corporate, wealth management and global clients in those countries. Grupo Bolívar, who own Vivienda, have been preaching regional consolidation too.

At the end of 2023, Grupo Bolívar, led by the Cortés family, reported assets of $19.1 billion.

“This alliance represents a strategic advance in Davivienda’s positioning in the region, maintaining Scotiabank’s global experience by becoming a shareholder of Davivienda,” Banco Davivienda said in a statement. “These agreements will allow Davivienda to bring an innovative and competitive value proposition with a global vision to the Latin markets where it operates.”

Scotiabank entered Latin America with a $1 billion stake in Banco Colpatria in 2012, enough for a majority stake. Four years later they paid $360 million for Citibank’s operations in Costa Rica and Panama. In 2018, Scotiabank took over Citi’s Colombian personal and SME banking operations.

The deal is expected to take around 12 months to finalize. Scotiabank will be represented on Davivienda’s board of directors. Key issues for the new bank will be introducing new technologies as well as dealing with a broader client base. However, Davivienda is now positioned to potentially take Bancolombia’s crown for number of customers and asset base.       

Following 25 years of negotiation, the agreement creates a free-trade zone for over 700 million people across two continents. However, the deal may prove politically difficult for some countries to ratify—especially Argentina—who have threatened to pull out of the Paris Climate Agreement.

Speaking at a press conference, Ursula Von der Leyen, President of the European Commission stated, “We are sending a clear and powerful message: In an increasingly confrontational world, we demonstrate that democracies can rely on each other. This agreement is not just an economic opportunity. It is a political necessity.”

French farmers have already protested by dumping manure on streets. Sophie Primas, France’s Junior Minister for Trade, said that they will oppose ratification of the agreement.

“No, we’re not alone in our opposition to Mercosur as it stands. We can achieve a blocking minority,” says Primas.

Farmers are protesting an increase in beef, poultry and sugar imports. The EU will receive 99,000 tons of beef at 7.5% duty, this accounts for 1.6% of the region’s beef production. Poultry and sugar imports would be 1.4 and 1.2% of total imports. Mercosur exporters pay an average of 40% duty currently.

Further controversy for the deal depends on US President-elect Donald Trump’s reaction. The BRICS countries as well as Canada, the EU, Mexico and Panama have all been threatened with trade tariffs since November’s election win.

The agreement gives Mercosur countries access to the EU market and European countries a chance to diversify from potential trade conflicts involving China and the US as well as access to critical mineral deposits in Latin America.

According to the EU, European firms exported €56 billion in goods to the four Mercosur countries and €28 billion in services in 2022. The agreement still requires legal checks and translation which could take several months. Should it fail, the EU and Von der Leyen would face a tricky political future. Should all countries ratify the accord, which could take years, it could expand to investment and political cooperation.

Banking in Central America and the Caribbean continues consolidating, with a mix of de-risking and record profits. With the emergence of neobanks posing a challenge, traditional brick-and-mortar institutions are offering more services. Many, such as El Salvador’s newest bank, Banco Integral, as well as Lafise in Nicaragua and Panama, are focused on small and midsize enterprises (SMEs).

The merger of Banco de la Produccion and Banco de Finanzas in Nicaragua suggests that middle-ranking businesses are being most affected by post-pandemic economic slowdowns. Meanwhile, investors had been waiting until after the US election to make their moves.

The delay has led to some taking a more creative approach and others focusing on what makes the region unique. In June, the Dominican Republic launched a $750 million green bond through Citibank, while El Salvador used JPMorgan’s special purpose entity in a historic $1 billion debt-for-nature swap.

Scotia Wealth Management followed up on last year’s Best Private Bank in the Caribbean award with another impressive set of results across the region. Despite a centralization policy, the bank made headway in some countries, cementing its presence in some of the more established banking markets.

Scotiabank’s acquisition of a 14.9% stake in KeyCorp for about $2.8 billion is part of its new capital spending in North America and the Caribbean.

The new Scotia Caribbean App gives regional customers access to the online banking platform through the upgraded Scotia OnLine; and to Scotia Access, a new digital collaboration tool. Scotia eCom+ is a new eCommerce platform. Together, these led to a 57% increase in digital adoption and nearly doubled profitability in Barbados.

Scott Thomson, Scotiabank’s global president and CEO, revealed in January 2024 that the Caribbean was a priority area in the institution’s global strategy. In the Bahamas, this was highlighted by a 45.9% year-on-year increase in net income.

Despite Panama’s issue of its first blue bond, it was a quieter year than the previous one for sustainability.

BAC backs up its investing in-house by being the first carbon-positive bank in the world. It’s also the first financial group in the region to adhere to the UN Principles for Responsible Banking.

Costa Rica has seen $700 million worth of finance for environmental or social impact. BAC signed a $180 million medium-term loan agreement with the Netherlands Development Bank and the German Development Finance Institution that will finance green projects in Guatemala. The loan will also finance over 10,000 SMEs led by women who have received training by BAC, as well as 289 regional nongovernmental organizations on its YoMeUno platform.

The bank’s publicity material will now be recyclable. As Central America struggles to convert to electric cars, the bank has stepped in with 23 charging stations in Costa Rica.

Following the successful launch of electronic checking in 2023, Banco Popular Dominicano has launched programs targeting the Dominican Republic’s tourism economy. The bank says it provides 50% of the tourism sector’s finance, totaling $1.6 billion, and is recognized by Wells Fargo and JPMorgan Chase for international transfers.

The bank has updated its main platform, App Popular, modernizing its technological architecture and improving customer solutions. It also introduced apps for microbusiness and SMEs (Comerza), receiving remittances (Yavá), entrepreneurs (Biz), and the youth market (Gnial).

For residents, the bank’s Finanzas con Propósito program provides financial education for families. Banco Popular’s alliance with PayPal allows the sale of products and services abroad while many regional banks are struggling with cross-border payments.

The introductions of Google Wallet in November 2023 and Apple Pay in August 2024 were a tribute to Banco Popular’s digital and international focus.

In September, Pemex announced a third-quarter loss of 161.5 billion Mexican pesos (US$8 billion). Factors contributing to the losses included decreased total sales; increased fixed asset deterioration, especially in hydrocarbon processing plants; and losses on foreign exchange. Pemex’s total sales were 7.7% lower than in third-quarter 2023.

“Due to our passive position in foreign currency, motivated by our current financing, an exchange loss of 130 billion pesos was recorded,” Pemex announced in a financial report. The company blamed a 6.8% depreciation of the Mexican peso against the dollar. Close observers blame the company for skipping evaluations, rushing production and not exploring deepwater regions or unconventional deposits.

The company’s total debt fell to $97.3 billion, reducing it to 2016 levels.

“We have to fix Pemex,” Sheinbaum said at a press conference. With the implementation of a new fiscal regime, dubbed Oil Right for Well-being, “Pemex will be able to keep a greater part of its income to finance its operations.” The plan seeks to reduce inefficiencies, diversify energy sources, and pay down debt while protecting output levels.

Part of the National Strategy for the Hydrocarbons and Natural Gas Sectors, the plan calls for simplifying Pemex’s tax duties so the company pays less to the government. It also merges three tax regimes into two: a general tax rate of 30% and an 11.63% duty on non-associated gas (natural gas produced independently of oil).

Víctor Rodríguez, Pemex’s new boss, has been ordered to reduce costs by 50 billion pesos, in part by eliminating some of the company’s 43 subsidiaries, which Sheinbaum admitted have “complicated” finances. A new Pemex law, expected next February, will seek to eliminate subsidiaries in exploration and production, industrial transformation, logistics and fertilizers. All finances will be concentrated in a single entity: Pemex. The company will be allowed to create new subsidiaries. A refinancing has not been ruled out for 2025, with $6 billion to $7 billion reportedly allocated in next year’s draft budget.