Remittances Remain Strong Amid Ongoing COVID-19 Pressure

The remittances that many Mexicans living and working in the US send back to family or loved ones in Mexico increased 18.1 percent between April and May, El Economista reports.

According to data from Banxico, remittances rose from US$2.86 billion in April to nearly US$3.38 billion in May. Between January and May 2020, remittance amounts have risen by 2.9 percent against the same period in 2019, having spiked to a record high of just over US$4 billion at the end of February before falling again in March.

At the moment, the remittance trend appears to be bucking the forecasts made by BBVA in April when it said that the COVID-19’s impact on the US economy could see remittances fall by 21 percent in 2021.

The bank’s report, which based its findings on the impact of the 2008 recession, set forth a ‘worst case scenario’ whereby remittances fall by 17 percent this year, up to 21 percent in 2021, and do not recover for 10 years. The bank noted that “there is currently a lot of uncertainty about the behavior and effects of the COVID-19 crisis” and that its scenario “outlines that the effect of the crisis will be greater than that observed during the global financial recession of 2008/2009.” From December 2007 to March 2019, remittance flows dropped by 20.8 percent from US$26.06 billion to Us$20.64 billion.

Because Banxico’s figures have two months of lag, the impact of the 24.7 million job losses that have occurred in the US as a result of COVID-19 on remittance amounts has yet to be portrayed. Though some US states have recently attempted to reopen their economies and stave off further job losses, outbreaks have hindered these efforts.

A study from the Pew Research Center shows that economic damage in the US will be overwhelmingly felt by “Hispanic women, immigrants, young adults, those with less education,” a group that is largely representative of Mexican migrants that journey north in search of work.

BBVA points out that “the proportion of undocumented Mexican migrants has been declining in the last decade.” While in 2008 there were 6.3 million undocumented Mexican migrants in the US, this figure had fallen to 4.9 million in 2017 according to the most recent estimates.

As of June 15, over 1,000 Mexicans have died in the US reports El Universal, 719 of which were in New York, the US state worst hit by the virus. 

The increased inflow of remittances is a touching reminder of bonds that remain across borders and distance. But it is also a signal of the difficulty that Mexico is facing. Should remittances fall, many people in Mexico will be facing desperate hardship. As BBVA points out, remittances are equivalent to 10 percent or more of GDP in the states of Michoacan, Oaxaca and Zacatecas.