Remittances to Mexico reached a new monthly record of just under $5.7 billion in May, although the strength of the Mexican peso in recent weeks and months is softening the impact of money sent home by workers living in the United States, Daily Mexico reports.
The Bank of Mexico (Banxico) reported on Monday that $5.69 billion in remittances entered the country in May, an increase of 10.7% compared to the same month in 2022.
The dollar amount for May is the highest for any month since remittance records were first kept in 1995. The previous record was $5.35 billion, set in October of last year.
The month-over-month increase in remittances was 13.8%, and Mother’s Day on May 10 helped boost the inflow of money from Mexicans working abroad, according to analysts from the financial group Monex and banks BBVA and Base Bank.
“Mexican migrants…send extra amounts of money this month so that women who are mothers…can buy a gift or save the money,” said Juan José Li Ng, a senior analyst at BBVA Mexico.
Data from Banxico shows that the almost $5.7 billion in remittances sent to Mexico in May came from 14.6 million separate transactions, an increase of 7.4% compared to the number registered in the same month of 2022. The average amount sent was $391 USD, a jump of 3.1% compared to the previous year.
The strongest position of the Mexican peso in May was 17.42 per dollar in the middle of the month. At that exchange rate, the average remittance of $391 was worth 6,811 pesos.
The dollar-peso exchange rate in May 2022 fluctuated from a little more to a little less than 20. At 20 pesos per dollar, the same remittance of $391 has a more attractive value of 7,820 pesos.
With a stronger peso, remittance recipients – mainly, though not exclusively, families – have less money to spend in Mexico, unless senders increase the amounts they send to offset the strengthening local currency.
Alberto Ramos, head of economics for Latin America at Goldman Sachs, acknowledged that “a strong peso hurts remittances” and said that remittances, once converted to pesos, actually fell 2.2% annually in May.
He also said that the strength of US dollar remittances is indicative of “a very strong US labor market and visible wage gains in activities and skill levels where Mexican citizens are disproportionately represented.”
Even as a strengthened peso eats up a significant amount of money that ends up in the pockets of those who receive payments from abroad, the importance of remittances to the Mexican economy remains significant.
Data from the central bank show that $24.670 million was sent to Mexico in the first five months of the year, an increase of 10.3% compared to the period January-May 2022. Analysts from the financial firm Monex pointed out that the amount is higher than the value combined share of Mexican agricultural and oil exports in the same period.
Based on data for the first five months of the year, Mexico is on track to surpass the calendar year record of $58.51 billion in remittances that was set in 2022. Mexico was the second largest recipient of remittances last year behind India, which had inflows of about 100,000 million dollars.
Analysts at Banco Base raised their forecast for remittances to Mexico in 2023 to $63.26 billion from a prediction of $62.88 billion in April because many senders are sending larger amounts to offset high, albeit declining, inflation, and the current dollar-peso exchange rate. A dollar was worth just over 17 pesos on Tuesday morning.
Banxico reported that remittances in the 12 months to the end of May totaled $60.8 billion, a record for a period of that duration.
President López Obrador frequently describes Mexicans who work abroad and send money home as “heroes.”
During a speech on July 1 to mark the fifth anniversary of his 2018 electoral victory, he said that 12 million Mexican families were benefiting from remittances, many of whom live in “the poorest and most marginalized communities in the country.”
“I thank our compatriots [abroad] for their help in the most difficult moments of the pandemic,” López Obrador said.
“A migrant proudly told me: ‘Mr. President, do not forget that we left Mexico, but Mexico never left us,” he added.
