Remittances to Mexico Decline in April: Reasons and Consequences
According to a report by Mexico’s central bank, Banxico, remittances from abroad to México decreased in April, totaling $4,761 million. This represents a 12.1% annual decline.
The balance of Mexico’s remittance account with the rest of the world stood at $4,661 million in April, down from $5,301 million in April 2024. This decline has raised concerns among Mexican authorities, including President Claudia Sheinbaum Pardo, who has initiated an investigation into the reasons behind the reduced remittances in the first quarter of 2025.
- April 2025 saw a monthly reduction of 6.9% in remittance inflows and a 14.5% expansion in outflows, resulting in a remittance account surplus of $4,793 million, lower than the $5,166 million reported in March.
- President Sheinbaum Pardo warned that a proposed tax on remittances by U.S. Republican lawmakers is unjust and would violate treaties, particularly the agreement to prevent double taxation.
- Despite not being approved yet, the additional tax on remittances has prompted Mexican officials, including Secretary of Economy Marcelo Ebrard and a group of senators, to travel to Washington to discuss tariffs and remittances.
Why is the decline in remittances concerning?
Economist Alberto Ramos from Goldman Sachs suggests that the decrease in remittances might already reflect the impact of stricter U.S. migration policies. Reduced financial support from Mexican workers abroad to their families in México can destabilize their economies and lead to a decline in services they must pay for, as the state does not provide them.
What if the 3.5% remittance tax is approved? Future implications
Experts from El Economista agree that the tax would likely foster an underground market of informal cash transfer networks.
- Dilip Ratha, a global migration and remittances expert, predicts that the increased cost of sending money will encourage the use of informal channels, reducing the taxable amount and diminishing expected revenue.
- Ratha estimates that the tax would generate “slightly less than $1,000 million” for the U.S. government.
- Economists from Oxford Economics suggest that both documented and undocumented migrants may rely on U.S. citizens to send remittances or turn to cryptocurrencies and informal cash transfer networks.
- Victoria Rodríguez Ceja, Governor of Banco de México, has warned that the tax implementation would undermine financial inclusion and the use of formal, secure remittance channels.
Key Questions and Answers
- Q: Why are remittances important to México? A: Remittances significantly contribute to improving the quality of life for recipients in México, supporting their economies and providing essential services when the state cannot.
- Q: What is the proposed remittance tax in the U.S.? A: The proposed tax is a 3.5% levy on remittances sent to México from the U.S.
- Q: How might this tax affect remittance flows? A: Experts predict that the tax could drive an increase in informal cash transfer networks and a decrease in taxable remittance amounts.
- Q: What are the potential consequences of reduced remittances for recipients in México? A: Reduced remittances can destabilize the economies of recipients and lead to a decline in essential services they must pay for, as the state may not provide them.
