Mexican Remittances: Buying Power Diminishes
The Mexican economy has been on a steady rise in recent years, with the peso becoming increasingly strong against the US dollar. This has had a significant impact on the purchasing power of remittances sent to Mexico from abroad.
Remittances: A Vital Source of Income
Remittances are a vital source of income for many Mexican families. According to the World Bank, in 2019, remittances to Mexico totaled $36.3 billion, making it the second-largest recipient of remittances in the world. The majority of these remittances come from the United States, with an estimated $30 billion sent in 2019.
The Impact of a Strong Peso
The strong peso has had a significant impact on the purchasing power of remittances sent to Mexico. As the peso has strengthened, the amount of goods and services that can be purchased with the same amount of money has decreased. This has had a particularly negative impact on those who rely on remittances for their livelihood.
The Decline in Purchasing Power
The decline in purchasing power has been particularly noticeable in the last few years. According to the Bank of Mexico, the purchasing power of remittances sent to Mexico in 2019 was 10.5% lower than in 2018. This decline is expected to continue in the coming years, with the Bank of Mexico predicting a further decline of 5.2% in 2020.
The Impact on Mexican Families
The decline in purchasing power has had a significant impact on Mexican families who rely on remittances for their livelihood. With the same amount of money, they are now able to purchase fewer goods and services. This has had a particularly negative impact on those living in rural areas, where the cost of living is often higher than in urban areas.
The Government’s Response
In response to the decline in purchasing power, the Mexican government has implemented a number of measures to help those affected. These include increasing the minimum wage, providing tax relief for low-income families, and increasing access to credit.
The Future of Remittances
The future of remittances to Mexico is uncertain. The strong peso is likely to continue to have a negative impact on the purchasing power of remittances, and the Mexican government will need to continue to take measures to help those affected. However, it is also possible that the peso could weaken in the future, which would help to restore the purchasing power of remittances.