Remittances to Mexico to set a new record this year
Mexico is expected to receive 49 billion dollars in remittances in 2021, which is a record figure. Households receiving remittances in Mexico increased from 3.6% to 5.1% last year, according to data from the yearbook of migration and remittances Mexico 2021 prepared by BBVA and the National Population Council (Conapo).
Today there are 38.8 million Mexicans in the United States; 11.5 million of them were born in Mexico, there are 13.8 million second-generation Mexicans and 13.5 million third-generation Mexicans. In recent years the Mexican migrant population has been around 12 million inhabitants and there are reasons to believe that this number may increase in the following years.
Worldwide, Mexico is the third country that receives the most remittances, only surpassed by China and India. While the United States and Canada ($200,500 million dollars), the Arabian Peninsula ($129,700 million dollars) and Europe ($121,200 million dollars) are the main regions of origin of remittances. Michoacán, Guerrero, Oaxaca, Zacatecas and Nayarit were the entities that received the most remittances last year.
In Mexico, 99.4% of remittances are received through electronic means, which brings with it the challenge of making remittance recipients and senders more bankable. The use of digital media has generated a decrease in commissions paid for sending money. More than 20 years ago, the cost of sending a remittance was between 10% and 12% of the amount. Progressively it has decreased and now Latin America is one of the regions in the world where it is cheaper to send remittances.
Currently, Mexico charges between 5 and 6% commission for sending remittances; only in El Salvador and Ecuador, dollarized economies, is it cheaper to send remittances. The Bank of Mexico and the banks in the country have implemented a mechanism to pay between 2 and 5 dollars per remittance, but it implies that both parties (sender and receiver) are in possession of a bank account.
Mexico has a highly informal economy and this poses a challenge for banking usage, but remittance-receiving families, in particular, have lower levels of banking usage than the rest of the country.
Mexican migrants in the US also have low levels of banking access. Mexican banks in conjunction with the Ministry of Finance are working together to allow Mexican workers in the U.S. to open an account in a Mexican bank with only a consular registration. As regards remittance recipients, through basic accounts, it is possible to open an account free of commissions, in an effort to achieve totally free mobile accounts, as well as to discourage people from having to go to branches. As far as banking services are concerned, the federal government seeks to help in this area through the Banco de Bienestar (Welfare Bank).
After remittances surpassed oil and tourism revenues, Mexico has to work to recover revenues in the latter two areas. In the long term, it is important to increase income from tourism and employment generation, so that migration will be for pleasure and not out of necessity. Another challenge has to do with the issue of security, not only for Mexicans going to the United States but also for Central Americans passing through Mexico in search of the American dream.