Remittance Tax May Cut Mexican Spending by 25%: ANPEC

The proposed US tax on remittances could reduce internal consumption in Mexico by up to 25%, according to the National Alliance of Small Merchants (ANPEC). Cuauhtémoc Rivera, President, ANPEC, said the impact would be most severe in states heavily dependent on these financial transfers.

Remittances support 11.3% of Mexican households, Rivera noted, adding that most of the funds are directly allocated to consumption. A new tax could significantly reduce this flow, adversely affecting economic activity, particularly in small retail businesses.

The states likely to be hardest hit include Chiapas, Guerrero, Michoacan, Zacatecas, Oaxaca, Guanajuato, the State of Mexico, Puebla, and Mexico City. Chiapas tops the list, with remittances accounting for 14.31% of its gross domestic product, Rivera said in an interview with El Economista.

Rivera also pointed to a decline in retail traffic so far this year. While small businesses previously received about 100 customer visits regularly, that figure has dropped to around 30 amid growing uncertainty over US trade and immigration policies. He warned that the number could decline further if remittance inflows decrease.

According to the 2024 National Statistical Directory of Economic Units (DUNUE) from INEGI, Mexico has 2.5 million economic units, with the highest concentrations in the State of Mexico, Mexico City, and Puebla.

Rivera dismissed the notion that migrants could increase remittance transfers ahead of the potential tax. He explained that most migrants in the United States lack the financial flexibility to do so due to irregular employment and fear of immigration enforcement.

“Mexican migrants live day to day,” he said. “They work in jobs like construction, cleaning, gardening, and child and elder care. These roles are not linked to illicit activities.”

He also reiterated that remittance flows are legitimate, countering suspicions that the funds originate from illegal sources. Rivera emphasized the critical role of migrant labor in the US economy, especially in sectors that require long hours or physical work.

ANPEC represents over 250,000 small merchants and collaborates with organizations such as the National Association of Self-Service and Department Stores, the Mexican Bank Association, and the Business Coordinating Council on a job placement program for Mexicans repatriated from the United States.