MexECON Blog

Remittances Continue to Fall

Mexicans living abroad sent just $2.87 billion back into Mexico during January and February, according to a new report from Banco de Mexico.  The level of remittances was down 14.8% from the same period one year earlier.  During January and February, the average remittance transaction (the vast majority of which are electronic transfers) was $314.59, compared with $347.18 in the first two months of 2009.  Nevertheless, the downward trend in remittances appears to be moderating.  Total remittances in February were down 14.1% year-over-year, compared with a drop of 15.8% in January and a decline of 15.7% during all of 2009.

Comment:  Remittances are an important source of foreign exchange for Mexico, and the money that Mexicans living abroad send back to their families in Mexico helps buoy consumer demand.  Most of the remittances are sent from the United States.  During the "Great Recession," the decline in the U.S. economy meant that many Mexicans living north of the border saw their incomes seriously reduced, and that led to a painful decline in remittances.  Now that the global economy is stabilizing or in the early stages of recovery, remittances should start to improve as well.  That should help support the recent upward trend in the Mexican economy and keep putting upward pressure on the peso.

Patrick Fearon, CFA
Vice President, Fund Management

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