Fear of Trump Move Drives Cash Transfers to Mexico to RecordBy
President proposed stopping flow to make Mexico pay for wall
Dollars sent home are a lifeline for some of Mexico’s poorest
Money transfers to Mexico from workers living abroad climbed to a record last year as Donald Trump’s election raised the prospect of the U.S. blocking the flow of cash to make its southern neighbor pay for a border wall.
Remittances rose 6 percent in December from a year earlier to $2.34 billion, the most ever for the holiday season, according to data released by Mexico’s central bank on Wednesday. The increase brings 2016 transfers to $27 billion, exceeding the previous high from 2007, before the financial crisis and U.S. recession. The December increase was less than the 11 percent median forecast of economists in a Bloomberg survey and compared with the surge of 25 percent in November, the immediate aftermath of Trump’s win.
During the 2016 campaign, Trump floated the idea of blocking remittances to make Mexico pay for a $10 billion border wall that he said would stop undocumented immigration. The transfers provide a lifeline for some of Mexico’s poorest households and communities, who depend on relatives working in kitchens and construction sites from California to Maine. Overwhelmingly coming from the U.S., the remittances were equivalent to about 2 percent of Mexico’s gross domestic product in recent years, exceeding oil revenue and rivaling foreign direct investment.
"Without a doubt there has been an impact from Trump’s rhetoric about a possible tax or restriction on remittances," said Rogelio Ramirez de la O, an independent economist who runs Ecanal, which advises multinational companies about Mexico. "If there’s a threat against remittances, workers are going to send more to try to get ahead of it."
Weakness in Mexico’s peso and the strength of the U.S. economy probably are also helping. The peso tumbled to a record low beyond 22 per dollar on Jan. 11 after Trump’s pledges to end or renegotiate the North American Free Trade Agreement and impose tariffs on automakers rattled investors. Economists on average expect Mexico to grow 1.7 percent this year, the least since 2013 and compared with 2.3 percent for the U.S. Many Mexicans work in the U.S. housing industry, which has recovered from the depths of the global financial crisis.
Mexican Finance Minister Jose Antonio Meade said on Tuesday that ensuring the free flow of remittances is a priority for his government and laid out ideas to make greater use of technology and the nation’s development bank structure to facilitate them.
Disrupting remittances would hurt people like Jaime Paredes, 51, an unemployed former valet parking attendant and bank teller. His younger brother, Carlos, who works as a cook in Reno, Nevada, sends him about 1,500 pesos ($72) monthly to pay for his medicine after he suffered a stroke and stopped working a year ago, he said, standing on a sidewalk in downtown Mexico City. Paredes was among about 200 people who participated in a protest outside the U.S. Embassy on Jan. 20, hours after Trump took the oath of office in Washington.
"When my brother is able to, he helps me due to my disability," said Paredes, who walks with the help of a cane. The transfers are "something that’s important for me, and I’m worried that it will get harder for him to do them.”
— With assistance by Rafael Gayol