Introduction to Remittances and Their Importance
Remittances, the funds sent by migrants working abroad to their families in Mexico, play a crucial role in the Mexican economy. In 2024, an unprecedented 11.1 million people in Mexico received remittances totaling $64,745 million, according to data from Banco de México (Banxico).
Monex’s Perspective on the Proposed Tax
Janneth Quiroz, Director of Analysis at Grupo Financiero Monex, discussed the potential impact of a proposed 5% tax on remittances during a presentation of their economic and stock market outlook for the second half of the year.
Impact on Mexican Families Receiving Remittances
Quiroz explained that the proposed tax would not only affect the income of Mexican families receiving remittances, known as “migradólares,” but could also lead to reduced consumption among Mexican migrants in the US.
“In the very short term, we might see a decrease of 5% in remittance receipts for some families, which would also impact their income. Additionally, people in the US who send these remittances may reduce their consumption to offset this retention,” she stated.
Other Factors Affecting Remittances
Quiroz also mentioned other factors that could influence remittances in Mexico, such as a cheaper US dollar. A weaker dollar would decrease the purchasing power of Mexican pesos received from US remittances.
“Although remittances have been increasing in nominal terms and pesos, the power of purchasing these remittances has significantly decreased more than the proposed 5% reduction due to potential US government retention,” she explained.
She added that as the exchange rate stabilizes against the US dollar, as Monex strategists anticipate, the positive effect of the exchange rate parity on remittance receipts might “start to diminish.”
Economic Scenario in the US
Quiroz also noted that a stronger-than-expected US economic scenario, with more growth and employment opportunities, could mitigate the impact of the 5% tax on remittances.
Conclusion
The proposed 5% tax on remittances in the US could lead to reduced consumption among Mexican migrants, as stated by Janneth Quiroz, Director of Analysis at Monex. Other factors, such as the US dollar’s value and the overall health of the US economy, also play significant roles in the impact on Mexican families receiving these vital funds.
Key Questions and Answers
- What are remittances? Remittances are funds sent by migrants working abroad to their families in Mexico.
- How many people in Mexico received remittances in 2024? Approximately 11.1 million people in Mexico received remittances in 2024.
- What is the total value of remittances received in Mexico in 2024? The total value of remittances received in Mexico in 2024 was $64,745 million.
- Who discussed the potential impact of the proposed tax on remittances? Janneth Quiroz, Director of Analysis at Grupo Financiero Monex, discussed the potential impact.
- What other factors could influence remittances in Mexico? Factors such as the US dollar’s value and the overall health of the US economy can significantly impact remittances in Mexico.
