Mexico City – Remittances sent to Mexico neared an all-time high in June, totaling $5.57 billion, coming close to the previous month’s record. However, the sharp appreciation of the peso against the dollar has weakened the impact of these remittances when evaluated in real terms.
According to data released by Mexico’s central bank on Tuesday, remittances in June, which represent money sent home from Mexican workers abroad, rose by 8.3% compared to the previous year. Yet, when measured in pesos, remittances experienced a 6.2% year-on-year decline, as explained by Goldman Sachs analyst Alberto Ramos.
The peso displayed remarkable strength against the dollar, surging more than 15% between June 2022 and June 2023. This surge was driven by higher interest rates and the trend of “nearshoring,” wherein manufacturing activities have been relocated from Asia to the region.
As a result of the peso’s appreciation, certain Mexican communities, heavily reliant on remittances sent from the U.S., have implemented spending cutbacks. Simultaneously, some workers in the U.S. have attempted to send more cash back home to mitigate the impact of the exchange rate.
With the substantial increase in remittances in June, Mexico achieved a quarterly record of $16.3 billion, surpassing the 12-month record of $61.2 billion.
Mexican President Andres Manuel Lopez Obrador has previously projected that Mexico could receive over $60 billion in remittances throughout the current calendar year. The first half of the year saw remittances reaching $30.2 million.
Nevertheless, given the moderation in economic activity within the United States, remittances to Mexico are likely to slow down in the upcoming quarters, cautioned Alberto Ramos.
