Why are Mexican migrants living in the United States sending less money home to their relatives? If you believe it is because of the economic slowdown, you are partly right. But experts identify other reasons.
Here are some facts: Mexican remittances have been on an off-and-on decline since 2007. In August, the 14th straight month of decline, Mexicans sent back $1.9 billion to their homeland, a drop of more than 11 percent since August 2012.
Why is it important? Because remittances are the second largest (licit) source of foreign revenue for Mexico after oil exports, and represent about 2 percent of GDP.
Construction, hospitality and manufacturing jobs in the U.S. have certainly been hit by the slowdown, and that has affected Mexican migrants. But this morning’s Latin America Advisor, a publication of the Inter-American Dialogue, a Washington think tank, had comments from experts noting other reasons for the drop.
“Frequently overlooked … are the effects of the enhanced anti-money laundering compliance programs, which hinder the flow of lower value remittances via money service businesses,” wrote Elizabeth R. Cantu and Ahmand Johnson of the Diaz, Reus & Targ international law firm.
While the total volume of remittances has dropped, Manuel Orozco of the Dialogue’s remittance and development program noted that more Mexicans are sending money home, just less of it. In July, there were 6.3 million transfers, compared to 5.9 million a year earlier, he noted.
Mexico’s Central Bank says the average transfer home was $303.90 in August, down from about $340 a year earlier.
The manufacturing rebirth and fluctuations in the Mexican peso also played a role, noted Mario Trujillo, CEO of DolEx Money Transfer in Lawrenceville, Ga.
“In addition to these macro factors,” he told the Advisor, “in the last year alone, two major Mexican banks, both under foreign ownership – HSBC and Banamex – have chosen to exit the family remittances business completely. This unprecedented exit by major financial institutions, coupled with other banks’ decision to limit cash payouts to their Mexican customers, have caused additional disruption in these traditional popular channels for payments.”