Remittances Reach Whole New Level in AprilBy Sofía Hanna | Wed, 06/09/2021 - 10:15
Banco de México’s (Banxico) latest report explains that remittances increased by 39.1 percent year-on-year in April 2021, their fastest growth rate for any month since 2003. This accelerated growth was influenced mainly by the larger number of transactions from the US.
For Mexico, remittances are one of the primary sources of foreign exchange. Remittances decreased in April 2020 but climbed back up in the following months thanks to Mexicans who increased the aid sent to their families in order to alleviate their struggles during the COVID-19 crisis, according to Reuters. This move pushed remittances to record levels. Banxico reported that in April 2021, Mexico received a capital inflow of US$4.05 billion from remittances.
"The boost to the US economy derived from the (US’s) stimulus checks continued to help. There could still be felt the effect from the direct transfers of US$1,400 approved in March, as distribution lagged for some people. The extension of unemployment benefits may also have acted as an additional source of income, despite some questions that it could affect the dynamism of the labor market," explains Banorte's economic analysts.
Remittances could continue to increase, add Banorte’s analysts, thanks to the progress in vaccination campaigns in the US, promoted by US President Joe Biden. Moreover, his administration’s continuous push for immigration reform could chart a path for thousands of migrants to be able to achieve legal status north of the border. These factors could push remittances to growth by about 10 percent this year, to approach US$45 billion.
However, there are many risks. The US’s unemployment rate was 6.1 percent and more than 20 US states are no longer granting federal unemployment support due to "shortage" problems, explains a report from BBVA. This relative shortage in labor can lead immigration authorities and employers to be laxer when hiring immigrants, creating a favorable environment for Mexican migrants.
The World Bank reports that Latin America and the Caribbean will be the regions with the greatest dynamism for remittances in 2021, with an estimated growth of 4.9 percent and income of US$108 billion. The BBVA report shows that during 2020 the main remittance recipient countries: Mexico (US$40.6 billion), Guatemala (US$11.3 billion), Dominican Republic (US$8.2 billion), Colombia (US$6.9 billion), El Salvador (US$5.9 billion) and Honduras (US$5.6 billion).