Why remittances to Mexico slowed down and what would be their impact on the economy

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After the monthly decline of 4.7%, analysts consider that it was a matter of time for the soft landing of the US economy to be reflected in the shipments made by the countrymen

From April to October 2023, remittances to Mexico exceeded the figure of 5 billion dollars (mdd) monthly, however, that streak was interrupted in November, when Mexican households received 4,908 mdd, according to data from the Bank of Mexico (Banxico).

Banxico detailed that during November, Mexico received 4,908 million dollars in remittances, which although represents an interannual advance of 1.9%, also marks a monthly decline of 4.7%.

According to analysts, it was a matter of time for the soft landing of the US economy to be reflected in the money transfers to Mexican families. However, they pointed out that the data for a particular month do not mark a trend and it will be necessary to wait for the results of December to analyze the situation more completely.

Even when November did not exceed 5 mdd, the Mexican economy received in the first months of 2023 the figure of 57,796 million dollars, in charge of the countrymen residing abroad, which represents an interannual increase of 8.7% compared to the same period of 2022.

Thus, Mexico exceeded by more than 4,600 million dollars the 53,157 million dollars received in the first 11 months of 2022. In fact, in previous months, the federal government predicted that the barrier of 60 billion dollars will be exceeded.

Some economic analysts have pointed out that the exchange rate between the peso and the dollar has had an impact on the economy of the families that receive remittances, since at the time of making the conversion they receive fewer Mexican pesos for each shipment, which could explain, in part, that the countrymen have increased the amount of their transfers.

According to Banxico’s report, the average individual remittance between January and November of last year was 394 dollars, higher by 1% than the 390 dollars of the same period of the previous year.

He detailed that the number of operations in this same period grew by 7.7%, going to 146.7 million from a previous figure of 136.2 million, 99% of them were electronic transfers.

The central bank highlighted that the increase in remittances in 2023 follows the upward trend marked since March 2020, when the Covid-19 pandemic began, with more than 40 months with consecutive interannual increases, which make them the main source of external income for the country.

On the other hand, Banxico reported that from Mexico remittances were sent abroad for a value of 1,135 million dollars during the first 11 months of 2023, an annual increase of 11.1%.

In 2022, Mexico received a record of 58.497 billion dollars, an increase of 13.4% compared to 2021 and the ninth consecutive annual increase.

President Andrés Manuel López Obrador has expressed his gratitude on several occasions to the 38 million Mexicans who are in the United States, from whom most of the contributions come, and whom he considers “heroes”, estimating that they benefit about 10 million poor families.

According to the president, Mexico became in 2022 the second country in the world, only behind India, in volume of reception of remittances.

Remittances represent about 4% of the gross domestic product (GDP) of Mexico, according to a calculation by the BBVA bank.

While a report by the Signos Vitales association indicates that about 4.4 billion dollars, 7.6% of the remittances sent to Mexico in 2022, would come from organized crime, in an operation that would serve to launder money from drug trafficking, something that López Obrador has rejected.

Source: Infobae