Mexico remittances pass US$50b, surge during pandemic

Mexico’s remittances – the money migrants send home to their relatives – have soared in the past two years and are now expected to top US$50 billion for the first time once 2021’s figures are added up. That would surpass almost all other sources of Mexico’s foreign income.

But as happy as the Mexican government is about the news – it calls the migrants “heroes” – the boom raises questions: Will Mexicans always have to emigrate? And is it sustainable or just blip fuelled in part by the United States government’s pandemic support payments?

In many rural places such as Comachuen, Michoacan, every store, business, and family depends on remittances.

“Without these remittances that migrants send back to their families here in Comachuen, the town would have no life,” said Porfirio Gabriel, who has spent nearly 13 years working on farms in the United States and now recruits and supervises people to go north.

Remittances as a percentage of Mexico’s GDP have almost doubled over the past decade, growing from 2.0 per cent of GDP in 2010 to 3.8 per cent in 2020, according to the government. Between 2010 and 2020, the percentage of households in Mexico receiving remittances grew from 3.6 per cent to 5.1 per cent.

For the first 11 months of 2021, remittances grew by almost 27 per cent. Mexico is now the third largest receiver of remittances in the world, behind only India and China, and Mexico now accounts for about 6.1 per cent of world remittances, according to a government report.

On one hand, the spike was simply a matter of need, caused in part by the coronavirus pandemic. Mexico’s GDP shrank 8.5 per cent in 2020, and while the economy recouped about 4.7 per cent of that loss in the first three quarters of 2021, growth appears to have slowed, and inflation spiked in the last quarter.

“When a Mexican family suffers illness or their household suffers damage, they receive more. … Why? Because, basically, they ask for help, and that is what I think happened here last year,” said Agustín Escobar, a professor at Mexico’s Center for Research and Higher Education in Social Anthropology.

Ironically, part of that growth may have been fuelled by a temporary decrease several years ago in the number of new Mexican migrants heading to the United States and a decline in the relative percentage of migrants without proper documents.

Escobar said that means that established migrants face less wage competition from new, young, undocumented arrivals.

“But how much it can continue to improve in the future is an open question,” he added.

And the fact that a smaller percentage of Mexican migrants don’t have proper documents than before means more qualified for US pandemic support payments in 2020.

A report by the Liberty Street Economics blog from the Federal Reserve Bank of New York said, “We find that about US$24 billion went to US residents born in Mexico, Central America, and the Dominican Republic in April through September” of 2020 when pandemic support payments began to flow under the CARES Act.

While people in Comachuen report using their money to educate their children and build up businesses, research shows that the vast majority of remittances are used for subsistence needs – buying more food or medicine or much-needed household appliances like refrigerators that will save families on food costs in the long run.

There is also a strange dichotomy: The largest flows of remittances go to Mexico’s most violence-plagued states like Guanajuato, Zacatecas, Jalisco and Michoacan.

Escobar said migration and crime sometimes go hand in hand. Those who receive funds from abroad become targets for criminals, creating fear that drives more to emigrate.

“Families in Michoacan are trying to hide that they are receiving remittances. They try to go to a bank branch that isn’t near their house, and not show it off, because these families become a target for kidnappings, to get the money,” Escobar said.

Raul Delgado, who heads the development studies unit at the University of Zacatecas, sees a “vicious, perverse cycle” in tougher US border restrictions. They make immigrant smugglers more necessary, which, in turn, empowers criminal gangs, who, in turn, prey on local people, who have to leave their home communities because of the violence.

AP