Remittances are 4% of Mexico’s GDP and in this decade they have generated more foreign currency than tourism and oil. This is notable, but more impressive is the fact that remittances represent almost three times the resources provided by the federal government’s social programs. In 2022, the countrymen sent 58,497 million dollars, at an average exchange rate of 20.12 pesos per dollar, this is equivalent to 1,176,000 million pesos. Last year, the Federal Government’s social programs delivered 401.240 million pesos, in the form of pensions for the elderly and people with disabilities, scholarships for students, support for farmers in Sembrando Vida and for the improvement of schools in La Escuela es Nuestra . The figures are in the Federation Expenditure Budget.
Why compare the trillion 176,000 million of remittances with the 401,000 million pesos of social programs? It is a provocation and serves to give us an idea of what remittances represent in national life and in national accounts. We are talking about two quantities that, in a certain sense, belong to parallel universes, but have communicating vessels. The remittances triple the social support of the Government, although they are transactions between individuals, marked by the situation of Mexicans who live north of the Rio Grande.
Social programs have to do with the government’s relationship with citizens. They are paid with Mexican taxes and delivered to citizens who meet the requirements defined by the Government.
Remittances continue to be news in 2023 because they register significant and unexpected growth. In the first quarter they totaled 13,948 million dollars, this is 11.4% more than in the same period of 2022. With this behavior, remittances once again defy expert forecasts. At the end of 2022, the World Bank and the IMF warned that there would be a slowdown in shipments. They framed the remittance forecast in the context of not very optimistic expectations for the global economy in 2023: there will be less growth and inflation will continue to erode the economic capacity of workers who send money to their countries.
In the case of Mexico, the “national” economists added other circumstances: the United States will see its economic activity slow down and perhaps enter a recession. Additionally, they called attention to a negative aspect of super weight. This is what makes sending dollars less attractive, because they buy fewer pesos.
Will remittances continue to grow unexpectedly in 2023? With the shipments of Mexicans from the United States, anything can happen. The last time they suffered a setback was in May 2020, just at the time when the covid had forced a massive closure of businesses in the United States and the cancellation of the activities in which Mexicans are most employed. Since then, there have been 34 months of consecutive growth. Between 2020 and 2023 they went from 40.607 million dollars to 58.497 million dollars. The monthly average went from 3,383 million dollars in 2020 to 4,874 million dollars. The 45% growth in this period is unmatched globally and its explanation resists simplistic answers.
Why have remittances grown so much? The list of explanations is long and the experts do not necessarily agree. There is talk of the generosity of the countrymen and the growth of the economic importance of Mexicans in the United States. The use of remittance transfer channels by organized crime groups is also mentioned. To underline this hypothesis, the question is asked: why is Minnesota the third state with the most transfers from the United States to Mexico?
The fact is that Mexico has become “addicted” to remittances, to the point where we could not explain the strength of the peso or the resilience of millions of households without them. The wage bill of Mexican workers in the United States has grown and the number of transfers has increased to exceed 100,000 per day. There are 4.9 million households that receive remittances and in 1.8 million of them, the head of the family is a woman. Almost 5,000 million dollars a month arrive, but also many “intangibles”: ideas, behaviors, identities, social capital and knowledge. What else can we do with them? What would we do without them?
