ICE Fears and a New 1% Tax Are Shrinking Remittances to Ecuador — And Cuenca Families Are Feeling It

If you've lived in Cuenca for any length of time, you know that remittances aren't just a line item in a government budget report. They're the reason your neighbor can send her kids to school. They're why construction crews are building new houses in Ricaurte and Baños. They're a significant chunk of the cash circulating through the local economy you participate in every day.

And they're shrinking.

The Numbers

Ecuador received approximately $7.916 billion in remittances in 2025 — a record. That's roughly 6% of the country's GDP, more than Ecuador earns from its three biggest traditional exports (bananas, shrimp, and cacao) combined.

77% of those remittances come from the United States, where an estimated 1.2 million Ecuadorians live and work.

Those remittances support approximately 1.7 million Ecuadorian families — in a country of 18 million people. Do the math: nearly one in ten Ecuadorians depends directly on money sent from abroad.

What Changed

Two things happened almost simultaneously at the start of 2026:

1. The 1% Remittance Tax

Effective January 1, 2026, the United States began imposing a 1% tax on cash remittances leaving the country. This applies to:

• Cash payments through remittance services (Western Union, etc.)
• Postal money orders
• Cashier's checks

What it does not apply to: digital transfers, debit card transactions, or bank-to-bank wires. So there's a workaround — but many Ecuadorian migrants, particularly those without US bank accounts or legal status, rely on cash-based remittance services.

The Center for Global Development estimates that for every 1% additional tax on remittances, the volume of transfers drops approximately 1.6%. Applied to Ecuador's $7.9 billion, that's a potential reduction of over $126 million per year.

2. ICE Enforcement

The tax is one thing. The fear is another.

Intensified immigration enforcement by ICE (Immigration and Customs Enforcement) has fundamentally changed the daily behavior of undocumented Ecuadorian workers in the US. They're working fewer hours, avoiding public spaces, and — critically — sending less money home.

Richard Jiménez, a US citizen and business owner in New York's Westchester County, told El Mercurio that his employees used to send $1,000-$1,500 per month to their families in Ecuador. Now they send "half or less."

Workers aren't just earning less — they're hoarding cash. Jiménez described employees avoiding furniture purchases and major spending, preferring to keep money liquid in case they need to leave the country suddenly.

What Cuenca Families Are Saying

The impact is concrete and immediate in Cuenca:

• One mother previously received $200 every two weeks for childcare expenses. She now receives $100 per month or less.
• A 23-year-old reported that his cousin's transfers have shifted from weekly to biweekly, with smaller amounts each time.
• Luis Tobar, economist at Universidad Politécnica Salesiana, warns the trend could accelerate: "Fear reduces work hours and employment, potentially slowing or decreasing remittance flows even further."

Azuay province — where Cuenca is located — has historically been one of Ecuador's highest remittance-receiving regions, driven by decades of migration to the US (particularly New York and New Jersey).

Why Expats Should Care

You might think this is a story about Ecuadorian families, not expats. But remittances are deeply woven into the local economy you live in:

• Construction and real estate — A significant portion of new home construction in Cuenca is funded by remittances. Less money flowing in means slower construction, fewer renovation projects, and potentially softer demand for building materials and labor.
• Consumer spending — Remittance-dependent families spend at the same markets, shops, and restaurants you do. When their spending power drops, local businesses feel it.
• The dollar economy — Ecuador uses the US dollar. Remittances are one of the three main channels through which physical dollars enter the country (along with oil exports and foreign investment). A sustained drop in remittances tightens dollar liquidity, which can affect everything from ATM availability to business lending.
• Social stability — Families that lose remittance income don't just tighten their belts. Some turn to informal lending, others delay medical care, and in worst cases, economic pressure contributes to migration decisions — creating a cycle.

The Paradox

Here's the strange part: in late 2025, remittances actually spiked as migrants rushed to send money home before the tax took effect and before anticipated enforcement crackdowns. Many families received several months' worth of transfers in advance.

That surge masked the underlying trend. Now that the advance payments have been spent, the real impact is becoming visible — and economists expect the gap to widen through 2026.

What to Watch

• March remittance data from Ecuador's Central Bank will be the first clean indicator of the new normal
• Whether migrants shift to digital transfers to avoid the 1% cash tax — this could offset some losses but requires bank accounts many undocumented workers don't have
• Ecuador's diplomatic response — the Noboa government has been cautious about criticizing US immigration policy, preferring to emphasize the new trade deal. But if remittance drops start affecting GDP growth, the political calculus may change
• Local impact in Cuenca — watch for slowdowns in residential construction starts, particularly in Ricaurte, Baños, and other neighborhoods with high remittance-funded development

The Bottom Line

Remittances are the invisible economic engine that keeps much of Cuenca running. When $7.9 billion per year starts shrinking — even by 5-10% — the ripple effects touch everyone: the construction worker who builds your house, the woman who sells vegetables at Feria Libre, the taxi driver who takes you to the airport.

This story isn't on most expats' radar yet. It should be.

Sources: El Mercurio, CNN en Español, Primicias, Banco Central del Ecuador