If the amount of money sent home by Mexicans working in the US offers a gauge for the health of the American economy, then there is some good news for President Joe Biden.
Remittances to Mexico hit a new high of $5.3bn in July, according to data from the Mexican central bank. That takes the total since January to $32.8bn, or 16 per cent higher than the year ago period.
After falling at the start of the pandemic, remittances to Mexico proved surprisingly resilient. They rose year-on-year in 2020 and hit record levels in 2021. Those are likely to be surpassed again this year.
About 11mn Mexican-born immigrants live in the US. There are an additional 25.5mn US-born Hispanics of Mexican origin. The money they send back accounts for about 95 per cent of all remittances to Mexico.
Compared with its southern neighbour, the US has recovered more quickly from the pandemic — in employment terms at least. The US labour market remains tight. The unemployment rate, despite ticking up to 3.7 per cent in August, remains near historic lows. In the services sector, in which many Mexican immigrants work, increases in hourly and weekly wages have outpaced the national average.
Still, remittance trends are an imperfect economic indicator. For starters, it is a lagging measure. The numbers could also be bumped up by a shift to electronic transfers during the pandemic. These transfers, as opposed to cash brought over the border, are more likely to appear in official data.
Altruism matters too. Some studies have shown that remittance flows can run counter-cyclically too, regardless of the health of the host country’s economy. Mexicans living in the US could be sending more funds home to help their families cope with surging inflation.
The fact that remittances now account for 4 per cent of Mexico’s GDP, exceeding the combined value of oil production and tourism as a source of foreign currency, speaks as much to the relative strength of the host country as the weakness of the Mexican economy itself.
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