The importance of remittances in Mexico

Remittances play a monumental role for the Mexican economy, perceiving incomes every year on impressive amounts surpassing the billions dollar mark; just in 2015 from January to July remittances summed up over 14.3 billion dollars, an exorbitant amount since the year 2000

By Daniel Juarez Wednesday, July 20, 2016 comments

dollars briefcase

Mexico registered in 2015 its highest grossing of remittances since 2007

 

Remittances are funds that emigrants send to their country of country, it’s a very common practice between family members to give each other financial support. Remittances can be defined as the quantity of pesos or the exchange of foreign currency coming from the outside, transferred through different companies by people who leave their country and earn foreign currency which they later send to their relatives.

 

pesos

 

The money-sending practice of emigrants it’s an activity that dates back to the late XIX century, but recently, by the end of the XX century it has reached an elevated state due to technological advances in worldwide communication and a major development over banking systems.

 

This practice has played a monumental role for the Mexican economy, which perceives incomes every year on impressive amounts surpassing the billions dollar mark; just in 2015 from January to July remittances summed up over 14.3 billion dollars, an exorbitant amount since the year 2000, when incomes surpassed oil export incomes according to the company Mexican Oil (PEMEX).

 

How does this benefit us?, Having a great income of foreign currency, the overall national reserves of currency increases, at the same time making it trustworthy for foreign investments which in return protects the Mexican peso, avoiding deficit due to sudden financial depression. It basically works as an anti-inflation protector.

People are also benefitted from the reception of this foreign funding; they can buy groceries, disposable items and house appliances which allow them to improve overall quality and life standards.

 

Although, not everything is hunky-dory when talking about money; while Mexico does benefit from having a significantly strong foreign income which in turn strengthens its economy, most of this money might end up being used to buy imported products, increasing its demand and unbalancing the market, thus making it less competitive against exported Mexican products.

 

dollars briefcase

 

Plus, money spent on stuff and not invested on various regions of the country, especially the ones lacking the much-needed structure, it is not possible to develop projects that will generate well-paid jobs in order to slow down or stop immigration issues altogether.

 

This is especially true for remittance-dependent Mexican states like Michoacán, which it is composed by a 7% out of their total GDP, 6.8% for Guerrero and 5.6% in Oaxaca.

 

Nonetheless, this has supported Michoacan’s current situation, which just got over a safety crisis over the last few years, remittance has increased the life quality of several citizens and makes up for a better state.

 

Experts claim that as long as the country keeps getting this massive income, national treasury will continue to help us avoid economic s dives, however we should keep an eye on investing on local economy to ensure new financial cycles that contributes to a better country. Create plans to use remittances in the most effective way possible.