Worker remittances to their families in Mexico reached an all-time high in March, totaling $4.15 billion, according to Banco de Mexico. Remittances—which are funds sent home by workers in other countries—had been increasing along with the decade-long U.S. economic recovery from the global financial crisis in 2008-09.
The remittances, which equaled roughly 3.8% of Mexico’s gross domestic product, or nearly $41 billion a year, are a crucial source of funds comparable with foreign direct investment into Mexico.
More than 95% of remittances into Mexico come from the United States. Those funds have seemingly accelerated during first three months of the year as the recovery from the pandemic takes shape.
There is seasonality to the remittances that we have smoothed out in our analysis. But that acceleration appears to conform with both the increase in U.S. economic activity during the first quarter and the excess of U.S. household cash not being spent on hospitality and travel but instead on residential construction and maintenance.
At $4.15 billion, remittances are such that they begin to rival foreign direct investment in Mexico, which has been treading water since 2016 and has been in decline during the pandemic.
A reassessment of U.S.-Mexico trade relations is in order and would benefit each of the trading partners. This is part of a larger discussion around economic diplomacy and policies that seek to put a floor under Mexico’s economy and quell the crisis on the border.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
