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Are remittances to Mexico really declining?

Sanket Mohapatra's picture

A slowdown in the growth of remittances to Mexico has been a cause for concern as these flows (mostly from the United States) provide a lifeline to a large number of Mexican families.

Migrant remittances to Mexico declined by 0.1 percent in June compared to the same period the previous year, according to the latest official data. This represents an improvement over the significantly larger 3.3 percent decline the previous month.  Also, this article from the WaPo states that overall in the first six months of 2008, remittances to Mexico have declined by 2.2 percent compared the first half of 2007.

In the current climate of negative news, it’s worth taking a step back to see if the pessimistic picture is justified.

Monthly data show that officially reported remittance flows to Mexico in the first six months of 2008 followed a very similar trend to that of the previous two years, and they have remained almost unchanged from 2007. Monthly remittances to Mexico show strong seasonality, reaching a peak during May on account of Mother’s Day. The official data shows at best a flattening since early 2007, especially coming after 20 percent average annual growth during the previous five years, and after taking into account seasonal fluctuations.
 
Moreover, Mexican migrants are still sending money home, if necessary by taking up whatever jobs they can find, postponing consumption, or drawing on savings. There are also anecdotal reports that stringent immigration enforcements have encouraged some remittances to shift to hand carry or informal channels.

More from the article:

"Some experts think that the Mexican central bank's numbers may reflect a shift by immigrants to less formal channels for transferring money home as immigration enforcement has stepped up.

Dilip Ratha, an economist with the World Bank, said that immigrants adopted more formal ways of sending money after the Sept. 11, 2001, terrorist attacks, using bank transfers, money orders, personal checks and other means that can be recorded by Mexico's central bank. With the crackdown on illegal immigrants, workers may be returning to more informal methods such as using human couriers or travel agencies, he said.

"What I feel is that the actual remittances are probably still continuing to rise, it is just that the officially recorded data are showing a decline," Ratha said. "Mexican workers are not using as visible remittance channels as before."

Can we rule out that the true size of remittances to Mexico (including unrecorded flows) is probably continuing to increase?

(For more on the latest reimttance trends, check out Migration and Development Brief 5)

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