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Macroeconomics analysis Act. 19 Sep 2018

Mexico is the fourth largest remittance recipient in the world

Mexico is one of the largest recipients of remittances in the world. In 2015 it received nearly $25 billion in remittances, the fourth highest in the world after India ($72 billion), China ($62 billion) and the Philippines ($30 billion).

Remittances represent an important source of currency for the country and currently comprise 2,3% of Mexico’s Gross Domestic Product (GDP), surpassed only by automobile exports and Foreign Direct Investment. The amount of remittances Mexico received in 2015 exceeds income from tourism and oil exports.

The Bank of Mexico defines remittances as the amount of national or foreign money sent from abroad to a recipient in the country. A significant portion of these resources come from Mexican migrants living around the world, especially in the U.S., the source of 95,6% of Mexico’s remittances.

According to the most recent data available, 1,3 million households in Mexico – 4,1% of the total – benefit from this monetary inflow. Depending on the urban or rural context where the households that receive these remittances are located, there are different means and agents that can deliver this resource. In 2015, about 44% of remittances to Mexico were directly paid by banking institutions, while the remaining 56% were delivered by non-banking institutions (supermarkets, department stores, convenience stores, drugstores).

Thanks to the technological progress in financial services made over the past two decades, today, almost all remittances to Mexico are made electronically (97,5%). Presently, remittances in cash or in kind account for merely 1.9% of the total, while the use of money orders remains marginal (0,6%).

The regions receiving the remittances are not distributed homogeneously throughout the Mexican territory, but obey to particular migratory patterns. For some states, remittances are key determinants of consumption. Some of the states that benefit more from the inflow of remittances include Michoacán, Guajanato and Jalisco, which belong to the traditional migratory region, and other such as the State of Mexico, Puebla, Oaxaca and Guerrero, where the migratory phenomenon is relatively recent.

Despite the importance of these monetary influxes, we must keep in mind that they are part of the income in many households, and that is why it is very hard to ask a more productive use from other sources of family income, such as the salary that any worker earns in Mexico. Calculations based on a number of studies indicate that the main uses of remittances sent by Mexicans are: buying clothes and groceries, settling debts and buying, renovating or building homes.

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