Remittances to Mexico have been an important support for Mexican households in the post-pandemic era, highlights an analysis by Banco Base.
In the first 11 months of 2022, the cumulative flow of remittances entering Mexico was 53,138.63 million dollars, which meant an increase of 13.46% over the cumulative flow of the same period of 2021.
However, the slowdown in growth is becoming increasingly clear, with monthly contractions in August, September and November.
While November usually sees a drop in remittance inflows, in November 2022 it was more pronounced at 10.43%, higher than the average drop of 6.17% of the previous 10 years.
It is important to keep in mind that, for remittance recipients, what is relevant is the purchasing power that remittances provide them, and for this it is necessary to analyze the performance of remittances measured in Mexican pesos adjusted for inflation.
Multiplying the dollar remittance figures by the average exchange rate observed in each month (taking the FIX exchange rate as a reference) and adjusting the data for inflation with the National Consumer Price Index (NCPI), we obtain that instead of an annual growth of 2.99% in dollar remittances in November, remittances fell 11.11% in real pesos.
Remittances
According to the inflation-adjusted peso remittances series, November’s annual contraction is the largest since January 2018.
From Banco Base’s perspective, it is clear that, unlike dollar remittances, remittances measured in real pesos are declining, which is expected to negatively impact consumption in 2023.
Likewise, remittances can be a double-edged sword for the Mexican economy, because for those who receive them, as with government transfers, they can act as a disincentive to seek formal employment, generating an increasing dependence on these flows and generating a deficit in the supply of jobs for certain sectors.
The figures for direct remittances, i.e., those delivered in cash and in kind, are calculated by the National Institute of Statistics and Geography (INEGI) based on the International Traveler Surveys and provided to Banco de México for the compilation and publication of balance of payments statistics.
Direct remittance receipts for the publication of the monthly remittance statistics reported in this bulletin are preliminary estimates by Banco de México, which are revised quarterly with the final statistics provided by INEGI.
