Sending Money To Mexico – Now And the Future

Remittances from the U.S. to Mexico have become a ritual among migrant workers. The modest wire transfers of cash assist in paying for food, school supplies, or even a new home for family members left behind in Mexico.  It is not only expected of the migrants to send money home, but the Mexican economy also relies heavily on the flow of remittances.

Mexico’s Central Bank reports that it received nearly $24 billion in 2007 and nearly $23.7 billion in 2006.  It is estimated that in 2004, $16.6 billion was sent to families in Mexico from the United States.

Who Benefits

Remittances serve as a sort of pension fund, a community development fund, and educational fund for many of Mexico’s elderly and young, but studies have shown that families only receive a portion of the money intended for them.

A study by an official in the Social Development Ministry, and two professors at the College of the Northern Border, a research institute outside Tijuana, concluded that families receive only about half of that amount.

The remittances have become so large that economists and business leaders here say the Mexican government has become excessively reliant on them, relying on this money to increase the balance of payments, disguise the decline in foreign investment, and use it as a substitute for broader anti-poverty programs.

Tougher Regulations

In a report back in January, the World Bank said that Mexico leads the world in the number of migrants with 11.5 million, but opposition toward illegal immigrants in the U.S. – many who are Mexican – has caused Federal law enforcement to crack down on entrance into the United States and deportation and/or imprisonment has resulted in a decrease in the amount of remittances sent.

In the last year, state and local governments have passed a number of ordinances and bills tightening employment regulations and providing more thorough investigations of Social Security numbers.

Sluggish Economy

The lethargic economy in the United States is affecting everyone and the decline in remittances has wounded Mexico’s families as well as their financial system. Virtually all money Mexico receives is derived from remittances coming from the United States.

A combination of the declining economy and tougher employment regulations are making it more difficult for migrants to find employment, therefore, decreasing the number of remittances sent home.  One of the giant’s in money-transfers – reports a 5 percent decrease in revenue in 2007.

The Mexican central bank said the final quarter of 2007 was nearly flat, at 0.2 percent, in remittances, showing how migrant money moves with the health of the U.S. economy.

Rise and Fall

From 2000 to 2006, the amount of remittances grew significantly until 2007, when
The number began to decline.  January through May of 2008 has seen a decline of $668.28 million.  Just in the month of May, a decline of $171.3 million less than the year before.

This is not a good sign – not just for the migrants and their families, but Mexico as a whole suffers significantly from this drastic decline as well since remittances from the United States equal 2.8 percent of its gross domestic product.