Mexico Received Record $40.6 Billion in Remittances in 2020

By Anthony Harrup

MEXICO CITY--Mexicans living abroad sent home a record $40.6 billion in 2020, up 11% from 2019 against expectations early in the year that the impact of the coronavirus pandemic on economies and employment would lead to a significant decline.

Remittances to Mexico remained strong in December, rising 17% from the year-earlier month to $3.66 billion, the Bank of Mexico said Tuesday.

"The sharp contraction of activity and employment in the U.S. have not impacted in a visible way the flow of remittances to Mexico," Goldman Sachs' chief Latin America economist Alberto Ramos said in a report. "Record high remittances and trade balance surplus...have more than offset the loss of income from international travel/tourism and likely led to a current account surplus in 2020 of more than 2.5% of gross domestic product."

Among likely reasons for last year's increase in remittances are that many migrant workers in the U.S. are employed in essential services that weren't shut down, and that many were eligible for U.S. stimulus programs, the World Bank said in an October report.

A study by the Bank of Mexico last year said Mexican immigrants in the U.S. could have received more in government support than their average wages in most states, including states from which the most remittances are sent such as California and Texas.

Another reason was rising unemployment in migrants' home countries.

"The pandemic certainly showed us that there is an even greater need during times of stress like that...whether it's to Mexico or to other parts of Latin America, or India, or the Philippines," said Raj Agrawal, chief financial officer at cross-border money-transfer and payments concern The Western Union Company.

After sharp declines in April and May, remittances to other parts of Latin America recovered later last year and rose 4.8% to El Salvador, 3.8% to Honduras, 7.9% to Guatemala and 16% to the Dominican Republic, compared with 2019, according to the Central American Monetary Council.

The World Bank estimated in October that globally remittances would fall 7% in 2020 and a further 7.5% this year, including an 8% drop in Latin America and the Caribbean.

"I think that's a little bit pessimistic for what remittances will do this year. We haven't seen remittances decline like that for two years in a row, so I expect it's going to be probably better than that," said Mr. Agrawal.

Oxford Economics said in a study published last month that the outlook for remittances in 2021 is uncertain, and "could fall anywhere within a wide range between a decline and a return to the pre-pandemic trend positive growth."

On the upside, strong rebounds in remittance-sending economies, and slower recoveries in recipient nations, could encourage workers to send more money home. On the other hand, new sources of remittances in 2020 such as people using electronic transfers instead of carrying cash in person because of travel restrictions may not continue, and many migrants may have delayed returning to their countries until this year, Oxford Economics added.

Write to Anthony Harrup at [e-mail]

(END) Dow Jones Newswires

02-02-21 1256ET