Mexicans in U.S. Sent Record Remittances -- Update

By Anthony Harrup

MEXICO CITY -- Mexicans working in the U.S. sent record amounts of money to relatives back home last year, illustrating the resilience of the U.S. economy despite the shutdowns imposed to fight the pandemic.

The surge in remittances, which surprised analysts and migrants alike, provided a lifeline for many poorer Mexicans in the midst of the country's biggest economic slump in decades.

Remittances rose 11% to $36.9 billion in the first 11 months of the year, more than the record $36.4 billion sent in all of 2019, according to figures released this week by Mexico's central bank. The average remittance was 4.3% higher at $340, the bank said.

In Guatemala, El Salvador and Honduras -- the Central American countries that make up the Northern Triangle -- remittances slumped in April but later rebounded, and were up 3.4% from January through October.

After the pandemic caused U.S. unemployment to surge to double-digit levels earlier in 2020, the World Bank and others projected that remittances to Mexico and elsewhere in Latin America would fall close to 20% from 2019, threatening a critical source of income for families that rely on the transfers to make ends meet.

"Even I'm surprised, with so many of my countrymen out of work, above all those that work in restaurants," said Hermelindo Saldaña, a resident of Santa Ana, Calif., who sends money to his mother in Mexico's Yucatán state. "But people look for ways to make some money to send."

Banco Bilbao Vizcaya Argentaria estimates that there are some 39 million people of Mexican origin in the U.S. including immigrants, U.S.-born residents with Mexican parents, and third- or later-generation U.S. citizens of Mexican descent.

Many activities in which migrants are employed didn't shut down completely in the U.S., such as construction, gardening and agriculture, and a significant number of migrants were eligible for unemployment benefits under the U.S. government's stimulus plan, said Alfredo Coutiño, the director for Latin America at Moody's Analytics. And because of the crises in their home countries, migrants faced the need to send more money to their relatives, he added.

The 58-year-old Mr. Saldaña, a painter from the southern Mexican state of Guerrero, said work in construction held up "because people are at home, looking to see what needs to be done." And migrants who had work were spending less because they couldn't go out to restaurants or amusement parks, and could send some of those savings home, he added.

MoneyGram International Inc., the Dallas-based money transfer company, said that in a December survey of around 1,500 of its customers, 69% said they sent more money in 2020 than the previous year despite hardships caused by the pandemic. Most cited increased needs of family and friends in their home countries, particularly to pay for food, housing and healthcare. And six out of 10 customers said they had made greater use of digital tools to send money than before.

Mexican President Andrés Manuel López Obrador, whose government responded to the crisis with only a limited stimulus to keep government debt from swelling, has called the rise in remittances "a kind of social miracle" that helped sustain consumption of basics during the economic downturn. Mexico's economy is expected to have shrunk 9% last year, its biggest fall since the Great Depression.

A rapid recovery in U.S. employment has also played a role.

Petra Fuentes, a 77-year-old grandmother of 21 in the central Mexican state of Hidalgo, said she stopped receiving remittances between March and May, when her daughter lost her job at a frozen-foods plant in Kentucky.

Transfers resumed after her daughter found work at a plant that makes optical lenses as employment activity picked up in May.

"I pay for my electricity, water and groceries with what my daughter sends me," Ms. Fuentes said. "When I didn't receive anything for those months, I had to pay for those with the help that the government gives to people over 70."

Another contributing factor could be the restrictions on U.S.-Mexico border crossings because of the pandemic, which appears to have prompted migrants to resort to electronic transfers instead of taking cash in person or sending it with relatives or friends. Electronic transfers are more likely to show up in the data.

Border crossings last year were down sharply from 2019, after having steadily increased since the 2008-09 financial crisis.

"People are still crossing the border for business and to see families," said Mark Lopez, director of global migration and demography research at the Pew Research Center. "That's still happening, but not to the degree it was before."

Mr. Lopez sees the resilience of the U.S. economy as a crucial support for remittances.

"I think it's a U.S. economic story as it reflects the U.S. rebound itself, in employment at least," he said. "It's not just Mexican immigrants who might be doing better, but others too."

Remittances elsewhere also point to the strength of the U.S. recovery. Overall remittances in the Philippines, whose expatriates are more widely spread across continents, were down 0.9% in the first 10 months of the year, but those from the U.S. were up 5.9%. Remittances to the Dominican Republic, which has most of its emigrants in the U.S., rose 13% in the first 10 months of 2020.

Remittances have for years exceeded receipts from oil exports and foreign tourism as a source of foreign currency in Mexico, supporting the country's finances. Lower oil prices and reduced international travel have made remittances even more important for Mexico.

Coupled with the expected contraction in Mexican economic output, remittances are likely to be equivalent to 3.8% of 2020 gross domestic product, up from 2.9% of GDP in 2019, according to analysts at BBVA.

Remittances should continue to grow this year, though they will likely return to a more consistent moderate growth of about 5%, Mr. Coutiño said.

--Héctor Hernández contributed to this article.

Write to Anthony Harrup at [e-mail]

Corrections & Amplifications

This article was corrected at 5:24 p.m. ET to refelct that U.S. unemployment rose to double-digit levels earlier in 2020, not earlier this year.

(END) Dow Jones Newswires

01-08-21 1354ET