Mexico: Weak peso drives surges in remittances in November
January 2, 2017
Mexican workers abroad continue to take advantage of a weak peso to send remittances home. Given the sharp depreciation of the peso against the U.S. dollar in November, transactions totaled USD 2.4 billion, which represented a massive 24.7% year-on-year increase. November’s expansion overshot even the most optimistic market expectations and a 7.1% increase in October. The results brought the 12-month trailing sum of remittances to USD 26.8 billion, which is an all-time high and marked an 8.1% increase from the same period of the previous year.
Most analysts agree that remittances are among the few indicators to thrive within the uncertainty generated by the election of Donald Trump as the 45th U.S. president. The Mexican currency’s sharp depreciation in the aftermath of the election and the possibility that the forthcoming U.S. administration will implement measures that hinder remittances, bode well for a spike in remittances in late 2016 and early 2017. A tight U.S. labor market will continue to support the inflow of transactions, but the jump in November is not likely to be sustainable as it was boosted by the aforementioned factors.
Author: Ricardo Aceves, Senior Economist