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According to recent data released by the central bank, Mexico received an impressive sum of nearly $5.7 billion in remittances during the month of May, setting a new monthly record. However, analysts caution that the strength of the peso against the dollar may have mitigated this achievement.
Since the majority of remittances to Mexico originate from the United States, the value is recorded in dollars. Goldman Sachs analyst Alberto Ramos explains that "a strong peso hurts remittances," referring to the fact that the appreciation of the Mexican currency has an adverse effect on the funds received when converted from dollars to pesos.
Interestingly, the peso has emerged as one of the top-performing currencies this year, appreciating over 13% against the U.S. dollar between May 2022 and May of this year.
Due to the peso's appreciation, when measured in local currency, remittances actually experienced a 2.2% decline compared to the previous year, as stated by Ramos.
Mexican President Andres Manuel Lopez Obrador has consistently highlighted the positive impact of remittances on the country's economy. The funds, primarily originating from the United States, have played a significant role in Mexico's economic growth.
In 2022, Mexico recorded a record high of $58.5 billion in remittances from abroad, making it the second-largest recipient country, trailing only behind India.
Despite the challenges posed by the "super peso," the dollar value of remittances sent in May increased by nearly 11% compared to the previous year.
The latest data for May reveals a substantial jump of almost 14% compared to the previous month, resulting in a total inflow of funds reaching $24.67 billion this year.
Notably, this amount surpasses the combined revenue generated by oil and agricultural exports during the same period, as noted by analysts at Mexican brokerage Monex.
Analysts at Monex and BBVA attribute part of the May surge to the celebration of Mother's Day, suggesting that around 10% of the increased transactions can be attributed to this commemoration.
The number of transactions in May experienced a 7% year-on-year increase, reaching a total of 14.56 million. Furthermore, the average amount per transaction rose by 3% to $391.
Goldman Sachs' Ramos emphasizes that the strength of remittances reflects the robust U.S. labor market and visible wage growth, particularly in sectors where Mexican citizens are prominently represented.
To compare today's best rates when remitting money to Mexico, use CompareRemit's easy-to-use USD to MXN exchange rate comparison tool!
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