Mexican remittances rose at the fastest pace in five years in September as immigrant workers took advantage of the peso’s decline to send more money to relatives.
Even as economic growth slowed in the U.S., money sent back to Mexico rose 21 percent to $2.08 billion in September from $1.72 billion in the same month a year earlier, the central bank said today. Remittances had not risen as rapidly since October 2006, when they shot up 24 percent, central bank data show.
While the U.S. unemployment rate is over 9 percent and more undocumented immigrants are being deported this year than ever before, that hasn’t stopped Mexican workers from sending more money to their families to take advantage of a cheaper peso, said Delia Paredes, chief economist at Banorte-Ixe. As more Mexican workers move into better-paying jobs, that also boosts their spending power, she said.
“Despite the fact that the construction sector remains very weak, the workers are moving into the service sector,” Paredes said in a phone interview from Mexico City.
The peso has weakened 14 percent against the U.S. dollar since Aug. 1, the second-worst performance among major currencies tracked by Bloomberg after the South African rand.
Mexico economists estimate that the currency will end the year at 12.96 pesos per dollar, according to a monthly central bank survey published today.
The survey showed economists lowered their 2011 growth estimate for a fifth consecutive month to 3.72 percent as the country’s recovery is hurt by a slowdown in the U.S., the destination of 80 percent of Mexico’s exports.
The analysts also reduced their inflation forecast for an eighth consecutive month to 3.3 percent for the end of 2011.
Economic growth will slow to 4 percent this year from 5.4 percent in 2010, the Finance Ministry estimated Sept. 8. Budget bills passed by both houses of Mexico’s Congress last month forecast 2012 economic growth of 3.3 percent.
Economists in the central bank’s monthly survey lowered their 2012 growth forecast to 3.24 percent from a previous forecast of 3.50 percent.
Slower global growth may lead Mexico’s central bank to relax monetary policy, according to the minutes of policy makers’ most recent meeting on interest rates, published Oct. 28. On the other hand, a sustained decline in the peso may fuel inflation and a more restrictive stance, the bank said.
The five-member board, led by Governor Agustin Carstens, on Oct. 14 kept the overnight rate at 4.5 percent for a 22nd consecutive meeting. Policy makers next meet Dec. 2.
The peso weakened 1.8 percent to 13.5974 per U.S. dollar at 3:26 p.m. at New York time from 13.1774 yesterday.