Mexico Remittances Seen Under Pressure in 2026, BBVA Says

Remittance inflows to Mexico are expected to face continued downward pressure in 2026 as shifting US labor conditions and restrictive migration policies affect the disposable income of Mexican workers abroad. According to Juan José Li Ng, senior economist, BBVA, the economic environment in the United States is currently unfavorable for sectors that traditionally employ Mexican migrant labor, such as construction, hospitality and light manufacturing.

This outlook follows a contraction in 2025, when Mexico received US$61.79 billion in family remittances, a 4.6% decrease from the historic peak of US$64.75 billion recorded in 2024, according to BBVA México’s latest macroeconomic report. The decline ended an 11-year streak of uninterrupted growth — the longest in Mexico’s modern remittance history — and marked the first annual contraction since 2020. Analysts attribute the reversal to a cooling US labor market, a lower average transaction amount and a higher number of migrant removals, which reached 320,000 individuals during the last fiscal year, according to data cited by El Economista.

Exchange Rate Volatility and Purchasing Power

Beyond the drop in dollar‑denominated volume, the appreciation of the Mexican peso and domestic inflation have significantly reduced the real value of remittances. The peso strengthened approximately 10.2% against the US dollar between November 2024 and November 2025, while inflation remained around 3–4%, compressing the real purchasing power of remittance-receiving households. Mexico’s Center for Latin American Monetary Studies (Cemla) estimates that the real purchasing power of remittances declined by roughly 14.4% during that period.

Li Ng warned that if the real exchange rate remains below MX$17.50 per dollar, purchasing power could contract by more than 15%. This dynamic means that even if total dollar inflows remain relatively stable, beneficiary families effectively receive fewer pesos to cover essential expenses such as food, medicine, rent and utilities. Cemla’s Jesús Cervantes noted that US$500 in October 2025 had the same purchasing power in Mexico as only US$355.90 in December 2020. To match the 2020 purchasing standard of US$500, recipients would now need approximately US$702.40.

BBVA Research has similarly estimated that remittances have lost about 16% of their real purchasing power in recent months, as the stronger peso reduces the peso value of transfers while domestic prices continue to rise. This combination has been particularly challenging for households that depend on remittances as their primary or only stable income source.​

Socioeconomic Impact on Vulnerable Households

Remittances remain a key pillar for poverty reduction and  income stabilization in Mexico. BBVA estimates that without remittance income, the number of people living in poverty would increase by approximately 1.1 million — from 38.5 million to 39.6 million — representing nearly 2.9% of the population. These flows effectively lift about 1.1 million individuals out of multidimensional poverty, supporting access to food, health care and education, particularly in rural and peri-urban areas.

Around 4.4 million households receive remittances, benefiting approximately 9.8 million adults, according to BBVA and Coneval-linked estimates. For more than 500,000 individuals, remittances represent the only means of affording the basic food basket. For many others, they prevent households from falling into food insecurity when local wages are insufficient. Remittances also finance small business investments and home improvements in states with high migration intensity.

Geographically, remittance inflows remain concentrated in traditional migrant-sending states:

• Guanajuato: US$5.51 billion

• Michoacan: US$5.39 billion

• Jalisco: US$5.14 billion

• Chiapas: US$4.16 billion

Together, these four states account for more than 30% of national remittance inflows.

Despite the national decline, nine states recorded annual growth in 2025, led by Baja California with a 22.2% increase. Analysts attribute this to cross-border “commuter” workers who reside in Mexico but work in US labor markets such as San Diego, Imperial County and Yuma. Approximately 70% of formal migrants in California and Texas send remittances to Mexico, often on a monthly basis.

New US Tax and 2026 Outlook

A new headwind for 2026 is the implementation of a 1% federal excise tax on international remittances sent from the United States in cash, money orders or cashier’s checks. The tax, introduced under the “One Big Beautiful Bill Act” and effective Jan. 1, 2026, applies to outbound transfers of US$15 or more.

Digital transfers funded by bank accounts or credit cards are exempt. However, the tax disproportionately affects undocumented migrants and cash-reliant households that depend on money-order-style channels, particularly for recipients without banking access in rural areas. Remittance providers are required to collect and remit the tax quarterly to the IRS, increasing operational complexity.

BBVA estimates that Mexican migrants could pay up to US$3 billion in remittance-related taxes between 2026 and 2034 if current transfer volumes and channel usage persist. Analysts expect total remittance inflows in 2026 to remain around US$60 billion — slightly below 2025 levels and well below the 2024 peak.

The combined effects of the new US tax, tighter immigration enforcement, a stronger peso and subdued wage growth in low-skilled US sectors create what analysts describe as a gradual downward adjustment rather than a collapse — a steady erosion of migrant-linked income that reduces financial buffers in many communities.

Policy and Financial Inclusion Responses

In response, policymakers and financial institutions have outlined several mitigation strategies:

1. Expanding dialogue with US authorities to preserve low-cost remittance channels.

2. Promoting digital remittance platforms, including mobile wallets and fintech corridors.

3. Increasing financial inclusion in high-remittance states to reduce reliance on cash-only disbursements.

4. Channeling part of remittance liquidity into productive investments, such as SME credit lines and housing improvement programs.