Remittances have a favorable impact on household consumption in Mexico

The remittances that migrants send to Mexico are one of the main sources of foreign currency in the country, as they surpassed the income obtained from oil exports, foreign direct investment, and tourism. They have represented an important measure to counteract some inflationary effects derived from the global health contingency.

According to data from the Inter-American Development Bank, more than 70 percent of the resources have a direct impact on the empowerment of housewives, the women who remain in the country and who are the fundamental basis of millions of households in the national territory.

Based on Banco de México's report, in 2021 the accumulated value of income from money remittances by Mexican nationals living and working abroad was 51 billion 594 million dollars, which meant an increase of 27.1 percent for 2020. They are placed in second place, after manufacturing, where they were 436 thousand 75.9 million dollars.

This does not mean that remittances are more important than the foreign currency generated by other economic sectors, since they are in no way comparable to foreign direct investment or income from oil exports or tourism, because the remittances sent by Mexicans in the United States go to five percent of the 35 million families in Mexico; that is, 1.8 million households.

Mexicans abroad only send 10 percent of their income to their relatives, who use it to survive and solve some health, education, and housing problems, for example, but it does not mean that they are productive investments.

One must not deny the importance of remittances. They have another function whose multiplier effect is shown in family consumption, which, although it contributes to economic activation, does so in most of the supermarket chains; A significant amount goes to foreign economies, since many products that are purchased come from other nations.

Mexico is the third country with the highest collection of remittances, only after India and China. This money is channeled to satisfy primary needs: food, clothing, education, and some medical services. In Mexico, the main sources of income are derived from raising money from the sale of oil, tourism, manufacturing, and remittances.

In some cases, remittances serve to venture into small and medium-sized companies, as well as local businesses that allow them to promote greater family growth; even, they are destined to the construction of a house, remodeling, or purchase.

In the current situation due to the pandemic, it is essential to capture these monetary remittances, which increased in 2021 as a result of the health contingency. This is important not only for Mexican families but also for the circulation of capital within the national territory.

Catchment

There are entities where these resources are substantive, particularly for those traditionally expelling (even though new states have been incorporated into the migratory flows), such as Jalisco, Michoacán, Guanajuato, State of Mexico, Mexico City, Zacatecas, Guerrero, and Oaxaca, in addition to municipalities such as Tijuana (the largest recipient of remittances), León, Zapopan, Morelia, Culiacán, among others. Just because they get a big chunk doesn't mean they're the richest states in the country.

From January to September 2021, foreign direct investment received 24 thousand 831.7 million dollars, while oil exports reached 28 thousand 925.6 million dollars, which implies that both items contributed two percent of the domestic product. gross (GDP), on average.

Due to the pandemic, the drop in activity in the tourism sector was significant; However, according to the National Institute of Statistics and Geography, in 2021 the economic benefit for foreign tourists and excursionists was 19 thousand 795 million dollars, with which it was positioned 19 percent below what was obtained in 2019.

In the case of oil exports, the income from this activity has an economic benefit in the hotel service, platform construction, preventive maintenance, oil infrastructure, feasibility studies, in the construction and energy sectors, etc.

In Sonda de Campeche, Pemex investments have had a significant impact on projects in the energy sector; that is to say, what economists call productive chains, which go beyond saying foreign exchange entered or jobs are generated, those dollars that arrive in the country for oil investments have multiplier expressions in a very wide range of the economy. Something that the currencies of migrants do not have.

One element with which it is intended to compare them is with those generated by foreign direct investment, questioned for its role in the national economy, for the generation of poorly paid jobs, for the poor entry of new technologies, and their limitations in terms of training, human capital; Even with all these criticisms, this sector does contribute to the creation of jobs.

The money they send does not create jobs, although they contribute four percent of GDP – a significant percentage – but due to the size of the Mexican economy it is not enough and, therefore, the financial sector does not depend on remittances, it is a substantial income for 1.8 million households in the country, but the national economy is not subject to them.

Source: UNAM