Mexico: Remittances show healthy expansion in 2015
February 2, 2016
Remittances from Mexican workers abroad contracted toward the end of 2015. However, the drop is mainly the result of a base effect. Transactions registered USD 2.2 billion in December, which overshot the USD 2.1 billion the markets had expected and marked the highest level in four months. However, compared to the same month of the previous year, the figure represented a 2.1% contraction (November: +6.7% year-on-year). This is mainly due to the fact that remittances surged 20.8% in December 2014, when workers likely increased the number of transactions to take advantage of the peso depreciation.
In the fourth quarter, remittances totaled USD 6.1 billion (Q3: USD 6.5 billion). According to a new breakdown elaborated by Mexico’s Central Bank, the larger chunk of transactions (USD 5.8 billion) came from the U.S., followed by Canada, which sent USD 67.7 million. Colombia is the largest Latin American contributor, where remittances recorded USD 8.1 million, and Spain sent USD 7.3 million. This information provides a clearer picture that most of the cash sent from Mexicans abroad comes from the northern neighbors.
Remittances from Mexicans abroad were 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 December.
In the full year 2015, remittances expanded 4.8%, which pushed transaction to USD 24.7 billion. The followed the 6.0% increase observed in 2014. As growth in the U.S. economy is expected to continue to recover and the labor market to strengthen this year, remittances are slowly approaching pre-crisis levels and the peak that occurred in 2007, when they totaled USD 26.1 billion.
Author: Ricardo Aceves, Senior Economist