Remittances to Mexico to fall

The Mexican central bank recently reported that remittances from overseas nations, especially, the US dipped 2.9% this year. This decline was due to the housing crisis and soaring food prices in the US. Stringent measures taken to curb illegal immigration of Mexicans also weighed on remittances.

The remittances to Mexico declined for the first time since the practice of recording remittances began. Jesus Cervantes, Director of economic measurement for Mexico's central bank, stated that remittances are expected to decline 1.5%-2% for 2008 over the previous year. Drop in remittances is a cause of concern for the Mexicans, as it is the second largest source of income after oil exports. Decline in remittances may also affect the US, which used to tax remittances to leverage its interests while negotiating with remittance-dependent nations in the past. Families and businesses that depend on remittances for their livelihoods have also suffered due to the 8.0% devaluation of the US dollar against the Mexican peso.

According to the Inter-American Development Bank (IADB), Mexico receives the highest number of remittances in Latin America, with more than 11 million Mexican nationals living in the US. The study further added that 18.0% of Mexican adults consistently receive remittances (averaging about seven times per year, each with a value of $190). Majority of remittances (78.0%) were utilised for basic necessities such as food, medicine and housing. Annual remittances nearly tripled from about $9 billion in 2001 to approximately $24 billion in 2007, amid improved reporting methods and increase in immigration.