Remittances Soar to Record High in Latin America, Providing a Lifeline for Desperate Economies

Remittances are a vital source of income and foreign currency for many countries but are no substitute for home-grown development.

Between January and November of 2021 Mexico received $46.83 billion in remittances — transfers of money by workers of Mexican descent largely in the US but also other countries to individuals in Mexico. It is a 27% increase on the same period of 2020, which itself was a record year for remittances. According to El Financiero, it’s the highest rate of increase in 18 years.

The Bank of Mexico still hasn’t published the data for December 2021 but barring a sudden, sharp reversal, Mexico’s remittance haul for 2021 will surpass $50 billion for the first time ever. That’s after increasing by 11.4% to $40.6 billion in 2020, a year when the U.S. economy, where 98% of the remittances to Mexico originate, suffered its worst annual contraction since 1946.

Mexico has registered 19 straight months of rising remittance inflows. Between January and November 2021, almost 124 million remittance payments were registered, 14.2% more than in the same period of 2020. Mexican migrant workers are not just sending money back home more often; they are sending larger amounts each time. The average remittance in the period was $378, 11% higher than in 2020.

“A Blessing” for Mexico

On Friday, Mexico’s President Andres Manuel Lopez Obrador (AMLO) described the trend as a “blessing” for the country he leads:

“It is the main source of income for Mexico. The data for December is an estimate, but I can tell you we have figures before the Bank of Mexico [releases its data] and we make a projection and it generally matches up, and we are calculating that by December… we will be at $51.63 billion… the equivalent of eight thousand pesos a month for 10 million families.”

Mexico is not the only Latin American country to have seen a sharp rise in remittance flows in 2021. According to the World Bank’s latest projections, published in November, Latin America and the Caribbean would receive a record remittance haul of $126 billion dollars in 2021, which would represent an increase of 21.6% on 2020. Mexico would account for just over 40% of the total.

In most parts of the world, remittances increased in 2021. Though the full data for the year is not yet available, the World Bank estimates that remittances to low- and middle-income countries grew by 7.3% in 2021, to reach a record $589 billion:

For a second consecutive year, remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA). This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.

The bank expected remittances to grow by 9.7% in the Middle East and North Africa, 8% in South Asia, 6.2% in Sub-Saharan Africa and 5.3% in Europe and Central Asia. The only region where remittances were forecast to fall in 2021 was the Asia Pacific.

The rapid recovery and dramatic resurgence of remittances is one of the big — and largely pleasant — economic surprises of the pandemic era. In April 2020, at the onset of the pandemic, the World Bank painted the bleakest of pictures for global remittances. As the global economy seized up, financial markets plunged and many migrant workers lost their jobs or hurried home, the multilateral lending institution warned that remittances would drop precipitously, just as had happened in the wake of the Global Financial Crisis:

Remittance flows are expected to fall across all World Bank Group regions, most notably in Europe and Central Asia (27.5 percent), followed by Sub-Saharan Africa (23.1 percent), South Asia (22.1 percent), the Middle East and North Africa (19.6 percent), Latin America and the Caribbean (19.3 percent), and East Asia and the Pacific (13 percent).

Fortunately, the forecasts were wildly off target. In the end, global remittances declined by only 1.7% in 2020 and in some regions, such as Latin America, they actually ended the year in positive territory. That trend accelerated sharply in 2021.

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