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Remittances to Mexico hit new record of $5.7bn in May

Money, Dollar, Person REUTERS/Yuriko Nakao
Remittances to Mexico from abroad hit a record high of $58.5 billion in 2022

Mexico brought in close to $5.7 billion in remittances in May, central bank data showed, breaking a monthly record that analysts cautioned was softened by the recent strength of the peso versus the dollar.

While Mexico records remittances in dollars, as most of the funds come from the United States, “a strong peso hurts remittances”, said Goldman Sachs analyst Alberto Ramos.

Mexico’s “super peso” is among the top-performing currencies this year, appreciating more than 13 percent against the US dollar from May 2022 to last May.

With a stronger local currency, recipients of funds from abroad receive fewer pesos when they sell the dollars they were sent.

Given the peso’s appreciation against the dollar, when measured in local currency, remittances actually declined 2.2 percent year on year, Ramos said.

Mexican President Andres Manuel Lopez Obrador has touted the economic boost remittances, which largely come from the United States, have brought to the country.

Last year, remittances to Mexico from abroad hit a record high of $58.5 billion, making Mexico the No. 2 remittance-receiving country, just behind India.

Despite the blow from the “super peso”, the dollar amount of remittances sent in May rose almost 11 percent year-on-year.

The May data shows a nearly 14 percent jump from the previous month, bringing the total of funds raked in this year to $24.67 billion.

That is more than the amount oil and agricultural exports combined have brought the country in the same period, analysts at Mexican brokerage Monex said.

The May boost can partially be attributed to the Mother’s Day holiday, analysts at Monex and BBVA said.

“We estimate around 10 percent of the increase in transactions can be explained by the commemoration,” analysts at BBVA said in a note.

The number of transactions in May climbed seven percent year-on-year to 14.56 million, with the average amount rising three percent to $391.

“The strength of remittances (reflects) a very solid US labour market and visible wage gains in activities and in skill-levels where Mexican citizens are disproportionately represented,” Goldman Sachs’ Ramos said.