Mexico: Remittances decrease in March following surges in the two prior months
April 1, 2016
Remittances from Mexican workers abroad took a hit in March, following two months with impressive growth. Remittances totaled USD 2.2 billion in March, which marked a 2.4% decrease over the same month last year. The reading contrasted a 13.0% surge in the previous month, the impressive 18.8% expansion in January and market expectations of a moderate increase.
In the first quarter, totaled USD 6.2 billion (Q4: USD 6.1 billion). According to a breakdown elaborated by Mexico’s Central Bank, the largest chunk of transactions (USD 5.9 billion) came from the U.S., followed by Canada, which sent USD 38.2 million. Colombia is still the largest Latin American contributor with remittances recording USD 6.9 million. This information provides a clearer picture that most of the cash sent from Mexicans abroad comes from the northern neighbors.
Remittances continued to be supported by the improvement in the U.S: labor market, particularly in the construction sector. U.S payrolls in the construction sector, which is a proxy of hiring dynamics in the labor market with a high proportion of Mexican workers, continued to show healthy growth in March. The surge in remittances in the first two months of the year was largely driven by the strong depreciation of the Mexican peso against the greenback, of which workers tend to take advantage in order to boost the value in national currency of their dollar transfers. According to analysts, the temporary boost from currency depreciations tends to be followed by some “payback” in the following months.
Remittances continued to show an upward trajectory toward pre-crisis levels and toward the peak than occurred in 2007, when they totaled USD 26.1 billion. The rolling 12-month sum of transactions totaled USD 25.3 billion in March, which represented a solid 5.7% increase compared to the same period last year. The increase followed the 6.7% expansion in the 12 months up to February.
Author: Ricardo Aceves, Senior Economist