Remittance to Mexico from the United States is experiencing uncertain times. We take a look at remittance news for the end of 2016, the start of 2017, and whether it’s possible to make predictions for the rest of the year.
Trump and remittance uncertainty
Remittance to Mexico took a desperate turn in 2016 when President Donald Trump threatened to end remittance across the USA-Mexico border during his campaign. According to The Economist, Trump stated in April 2016 that Mexico would be required to pay between $5b and $10b to build the wall between the two countries. The article further stated “the Trump administration will force Mexico to stump up by threatening to block money transfers from undocumented Mexicans living in the United States”.
It seemed that thousands of Mexicans working in the USA and sending money back home for school fees, mortgages and retirement funds, took the threat seriously. Fortune reported that “Mexicans abroad sent home nearly $2.4 billion in transfers in November”. This substantial amount was 24.7% higher than in 2015 and it marked the country’s fastest pace of remittance expansion since March 2006, as documented by the data from the Mexican central bank.
The total remittance sent from the USA to Mexico decreased again slightly in December 2016, but remained high in comparison with the rest of the year and the year before.
Remittance is not Mexico’s largest income
The White House reported that remittance from the USA is the largest income for Mexico, yet the fact checking website, Politifact, reported that this was, indeed, a false statement, or more commonly referred to as ‘alternative facts’. Although Mexico did receive $2 billion more in remittance in 2016 compared to the previous year, remittance wasn’t the highest earner for the country. Not by a long shot.
Politifact states that, according to federal data, the United States in 2015 imported Mexican goods totaling $295 billion, an amount considerably higher than the $24.8 billion received through remittance in 2015. Furthermore, foreign direct investments by the United States brought in $28 billion in 2015, which is also higher than remittance. And although remittance totaled approximately $27 billion in 2016, it remains less than both the income generated from exports and direct investment.
Saying this, remittance remains a very important income generator for the country. It is the only way for many families to make ends meet.
Remittance can’t simply be halted
The economist’s report gave some hope to Mexicans whose livelihoods depend on remittance in US dollars. According to the publication, “blocking certain remittance payments requires the Patriot Act to be rewritten, which needs legislative action by Congress and would probably be challenged in court”.
Furthermore, experts in the field reckon that such a rule would imply new costs for all non-citizens transferring money to their home countries, not just those sending money to Mexico. To complicate the plan even more, the Economist argues that such a rule would simply push legal transactions underground, “creating a black market for remittances and making such payments more difficult for government authorities to track”.
It is therefore unlikely that President Trump can simply halt or increase the costs of remittance from the USA to Mexico and Mexicans can continue to use legal and trustworthy services like Ria Money Transfer to send money back home. It will be a very long, arduous and almost impossible process to simply end remittance across the Mexican-USA border.
Forecasts, insights and advice for 2017
A few factors contribute to the choices and considerations Mexicans will have to make during the rest of 2017.
Firstly, there are currently 11.6 million Mexicans living in the United states. Stated differently, an astounding 28 percent of the US population is Mexican-born. After the Trump-election of 2016, it is more important than ever for Mexicans transferring money back home, to do their homework.
Secondly, the peso has decreased in value by 10% after the 2016 election. Therefore it is more expensive to send the same amount of pesos to Mexico than it was a mere few months ago.
Thirdly, the current forecast, according to finder.com, is that remittance to Mexico will reach $28.7 in 2017. This shows that remittance will continue to be an important income generator for Mexico and its people.
Considering the large amount of Mexicans living in the United States, the drop in the value of the peso and the predictions for the 2017 remittances, it is very important that Mexicans choose their money transfer service wisely, in order to get the most for their hard-earned US dollars.
Finder.com recommends that Mexicans choose independent money transfer service over banks. While it is easier to transfer money via your local bank, because you don’t have to complete more paperwork, the costs are almost always higher and the money takes longer to reach its destination.
Independent companies generally charge a much lower fee for international transfers and companies like Ria Money Transfer offer the added service of collecting the money in cash at one of the many branches spread out across Mexico.
It is, as yet, still unclear how President Trump will pay for the wall, and whether or not he will try to make it more difficult for Mexicans to send money back home. All that is clear is that remittance will remain a very important source of income for parents, children, and pensioners living in Mexico, receiving money from their family members working hard in the United States.
As long as Mexicans compare their options, do their research and select a trustworthy and affordable money transfer service, they will be able to send the largest amount possible back home to support their families.