Mexico: Remittances leap to near nine-year high in March
May 2, 2017
Remittances to Mexico totaled USD 2.5 billion in March, which marked the highest reading since October 2008 and a robust 15.1% expansion from the same month last year. The result followed a 1.2% contraction in February and caught analysts by surprise, who had expected remittances to increase a much softer 3.2%. Building on March’s surge, the 12-month trailing sum of remittances totaled USD 27.4 billion, which represented a 8.5% increase compared to the same period last year. The increase came in above the 6.9% expansion in the 12 months up to February.
Mexican remittances have been trailing higher in recent months on the heels of sustained gains in the U.S. labor market and low transaction costs linked to the weakness of the peso. March’s surge likely reflected stronger real wage income gains for Mexican workers as the U.S. neared full employment at 4.5%, which analysts see having a more relevant impact on wage compensation than usual. Seasonal factors were also at play however, with Easter-related seasonality likely adding to March’s growth in remittance flows from its northern neighbor.
Meanwhile, uncertainty remains high regarding Trump’s stance on Mexican remittances. During his campaign the now U.S. President threatened to make Mexico pay for the wall by raising levies from money Mexicans sent abroad. Although months after his election little progress has been seen in this regard, Mike Rogers, a Republican congressman from Alabama, recently introduced a bill that would see a 2% fee on all remittances to the U.S. southern neighbor. This is expected to stoke the debate and could see remittance growth heading even higher before any hindering measures are implemented.
Author: David Ampudia, Economist