A potential TPS lapse threatens billions in remittances, posing a major shock to Central America.
This article appears in the November issue of Global Finance Magazine.
Hundreds of thousands of Salvadoran and Honduran nationals stand to lose their temporary protected status (TPS) in the U.S., along with their work permits, leaving them jobless and subject to deportation. The TPS lapse would be a calamity for the economies of their home countries as well, where remittances represent 27.5% and 30.1% of GDP, respectively, according to the World Bank.
Haitians and Venezuelans have already lost their TPS designation. While the U.S. government argues that the security situation in El Salvador has improved, a state of exception has been in place since March 2022, leading to over 93,000 arrests, mostly of young males.
“El Salvador’s [TPS] designation was set to expire on September 9, but the Department of Homeland Security failed to publish its decision within the statutory timeframe,” said Alejandro Kaffati, independent economic analyst. “This is an extension by default rather than a substantive decision, so uncertainty persists.”
The situation for Hondurans is clearer. The U.S. announced termination of their TPS designation in July 2025, and it took effect two months later. A federal judge overturned the decision, but a Supreme Court ruling regarding Haiti and Syria in June 2026 restricted judicial review.
U.S. authorities have said there will be no further extensions or grace periods, despite Honduran President Nasry Asfura’s pleas for an orderly return and continued work permits.
“We ask the United States to analyze each case. They are exemplary citizens who work hard, have adapted, and have respected American laws,” Asfura said in an August press conference. “We have to prepare, we have to welcome them here, if that is the case, to open our doors to them.”
‘A Significant Shock’
Incomplete data and limited U.S. enforcement capacity make mass deportations unlikely, Kaffati argued. But losing TPS and work authorization would force thousands into informal work. Lack of census data also affects economic projections for a sub-region—El Salvador, Honduras, and Guatemala—that is forecast to receive over $51.6 billion in remittances this year.
“According to my estimates, if between 55,000 and 70,000 people stopped sending approximately $334 million to $425 million, it represents between 0.5% and 1% of GDP,” said Kaffati. “It is a significant shock, yet manageable.”
A study last fall by Ian Walker, a consultant and advisor to Sendas, a Honduran think tank, concluded that returning migrants should be viewed as assets in the region. But reaping the benefit requires coordination of private-sector investment, public policy, and reliable institutions. In May, the Honduran government approved a Special Law for Facilitating the Return and Protecting the Assets of Honduran Migrants.
Having spent some 20 to 25 years in the U.S. labor market, many returnees will bring skills with them that they can utilize in fields like business process outsourcing, construction, tourism, and logistics linked to nearshoring.
“Remittances have served as a substitute for employment policy,” said Kaffati. “For 25 years, the economy exported workers rather than creating jobs. More than 3 million Hondurans rely on remittances. An economy can adapt to a gradual shock, but an abrupt contraction leaves no room to react.”
Other countries whose citizens face the loss of their TPS designation by the end of this year include Ukraine, Lebanon, and Sudan.
Nic Wirtz is a contributing writer based in Guatemala.
