The flow of remittances to Mexico is shaping up to break a record in 2022, in accordance with the trend shown from January to September.

Already in the first nine months of this year, remittances totaled US$42.978 billion, the highest level for a similar period.

Previously, Mexico obtained its highest historical amount from January to September 2021, when the indicator reached 37.35 billion dollars.

Remittances are income from foreign economies, generated mainly by the temporary or permanent migration of people.

However, its formal definition goes beyond this.

It is based on balance of payments criteria, without focusing exclusively on migration, employment or family ties.

Remittances include both remittances sent through formal channels, such as electronic money transfers, and those that cross borders informally in cash.

In many cases, they come from immigrants who are already resident in another country.

They also include the net remuneration of border, seasonal or short-term workers who work in a country where they do not reside.

Remittances to Mexico

Family remittances continued to be an important source of consumption financing: in 2021 they totaled $51.586 billion or 4% of Mexican GDP.

Previously, remittances were $33.677 billion in 2018, $36.439 billion in 2019 and $40.605 billion in 2020.

Mexico does not apply foreign exchange restrictions or restrictions to repatriate what is invested or pay profits, dividends, interest and royalties abroad. However, remittances, including the payment of dividends and profits and any type of earnings, are subject to a tax.

As negotiated in the Investment Promotion and Protection Agreements (APPRI) and trade agreements, Mexico may temporarily limit transfers abroad to maintain balance of payments equilibrium.

Overview

Mexico’s balance of payments current account deficit exceeded US$20 billion each year of the 2016-2018 period, representing between 1.7% and 2.2% of GDP).

The behavior of the oil balance, the services balance and the primary income balance fundamentally explain these deficits.

On the other hand, the surplus in the secondary income account, particularly from remittances, continued to increase.

The Covid-19 pandemic caused a sharp contraction in exports and imports of goods and services in 2020.

But the drop in imports was larger, resulting in a balance of payments current account surplus of US$26.21 billion, or 2.4% of GDP.