MexECON Blog

Decline in Remittances Moderates

In a report last week, Mexicans living abroad sent $4.8 billion back to Mexico in the first quarter of 2010.  The level of remittances was down 12.0% from the same period one year earlier.  Nevertheless, the decline in remittances appears to be moderating.  In January and February, remittances were down 14.8% year-over-year.  The average remittance transaction in the first quarter was $324.27, compared with $314.59 in the first two months of the year.

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 is an important source of consumer demand.  Most of the remittances are from the United States.  During the recent global recession, the decline in the U.S. economy had a strong negative impact on Mexicans living in the United States, and remittances fell sharply.  Now that the global economy is on the mend, remittances should start to improve.  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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