Remittances from the US Strengthen Mexican Economy

Remittances sent from the US to Mexico broke a historical record in 2019, reaching US$36 billion and becoming the second most valuable source of foreign exchange for Mexico after automotive exports, which generated US$150 billion in 2019. Remittance receipts were more valuable than the oil and gas, tourism and agriculture industries; three of the pillars on which the country’s economy is based. The figure, reported by Banxico on Tuesday, represents an increase of 7.04 percent compared to 2018, and the highest amount since official records began.

This is a positive milestone for Mexico in macroeconomic terms and demonstrates the enormous dependence that much of the country’s population has on financial support sent by family or friends in the US. Remittance receipts have not stopped growing since 2013, even when Barack Obama was in the White House.

The main reason for the growth is found in the data on the US economy, which ended 2019 with a 2.3 percent GDP growth. Though a positive growth figure, it nevertheless reflects the lowest growth since Donald Trump became president. This growth has been achieved thanks to actions such as the creation of quality employment, the low cost of debt and the stabilization of US trade with its partners following the signing of agreements including the USMCA, signed with Mexico and Canada. The other reason is the depreciation of the peso against the dollar in recent months.

However, despite the special socio-political context in which Mexico and the United States are involved, there is reason to believe that remittances will continue to grow in the future. The data offered on Tuesday with Banxico coincided with the State of the Union address given by President Donald Trump. During his speech, which sowed a deep division between Republicans and Democrats, Trump remarked on the signing of the USMCA, a free trade agreement that will replace NAFTA, as a resounding success. Trump said that this agreement will mean the creation of 100,000 new jobs in the US automotive industry. “One of the single biggest promises I made to the American people was to replace the disastrous NAFTA trade deal. In fact, unfair trade is perhaps the single biggest reason that I decided to run for president. Following NAFTA's adoption, our nation lost one in four manufacturing jobs. Six days ago, I replaced NAFTA and signed the brand new USMCA into law. The USMCA will create nearly 100,000 new high-paying American auto jobs. It will also bring trade with Mexico and Canada to a much higher-level degree,” he said.