Reviving construction in the US helped remittances

Go Global By CENFENG July 24, 2020

The resilience shown by remittances to Mexico in the first months of the crisis unleashed by the COVID-19 pandemic could stem from three circumstances: the partial revival of economic activity in various U.S. locations, the increase in the purchasing power of workers in that country during previous years, and the fact that a third of them could already have U.S. citizenship, considered Jesús Cervantes, manager of Economic Statistics at the Center for Latin American Monetary Studies (CEMLA).

On July 1, the Bank of Mexico reported that households with this type of income in the country received $3.37 million in May alone. A figure that, in addition to the flows of the previous four months, amounted to $15.5 million, the largest accumulated flow for a similar period since the measurement began.

“It is likely to reflect the slight improvement in employment of Mexican immigrant workers, which resulted from 84,212 occupations (…) particularly in the U.S. construction sector,” Cervantes said.

Interviewed by El Economista, he considered that this resistance to the forecasts of a fall in the flow of remittances that they had in CEMLA and other international organizations could also be linked to the stronger purchasing power of resources perceived by Mexicans displaced in that country.

The low inflation and full employment they reached in 2019 could have a positive impact on the incomes of Mexican migrants, especially on savings that they are now sharing with their families in Mexico, he highlighted.

The CEMLA specialist argued that this resistance of remittances could also be explained by the fact that a third of the Mexican migrants who send these remittances already have U.S. citizenship.

Perhaps this facilitated Mexicans’ access abroad to the federal supports of the originating country, particularly the United States, and state support for the place of residence, he said. Checks they were able to share with their families in Mexico, for example.

The CEMLA expert took data from the U.S. Census Bureau to illustrate that 32.2% of Mexican immigrants were held by the country’s citizenship in 2018. This ensured them access to the economic benefits distributed by the US government during the pandemic.

It further recalled that most state governments further provided financial support.

Securing families in Mexico

The observation of the Cemla expert is consistent with the evidence shown by the International Monetary Fund (IMF) which released an analysis on “Remittances in the Covid-19 era”, confirming that “in critical episodes of the recipient countries, migrants often support with a greater flow of remittances”.

This “helps families in their country against income shocks and softens the impact,” the analysis highlights.

However, given the size of the global crisis unleashed by COVID-19 and its effect on the United States, which is the main destination for remittance-sending Mexican migrants, IMF analysts assume that these flows will collapse, which will eventually affect recipients.

That said, Mexico’s case has defied that assumption over the last five months.

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