Understanding the Significance of International Remittances
The International Day of Family Remittances, observed on June 16, acknowledges the crucial role played by migrants in sending economic resources to their countries of origin. Over the past decade, these transfers have reached a staggering $5 trillion globally.
Through these remittances, migrants not only support their families but also finance education, healthcare, housing, and productive projects. In Mexico, they account for nearly 5% of national consumption and serve as the primary source of income for millions, particularly in rural areas and vulnerable communities.
Mexico’s Concerns: Declining Remittances and Proposed US Tax
However, this year’s observance comes with concern. According to Mexico’s central bank, the country experienced a 12.1% annual decline in remittances received in April, totaling $4.761 billion.
This marks the second consecutive month of decline, coinciding with tightened migratory conditions in the US and discussions about a proposed 3.5% tax on remittances sent by undocumented workers.
If implemented, this levy would disproportionately affect undocumented Mexicans, who constitute 37% of Mexican-origin migrant workers in the US, according to Pew Research Center data.
Remittances: More Than Transfers, a Development Channel: UN
According to UN data, remittances have surpassed official development aid and foreign direct investment in numerous countries. By 2030, they are estimated to flow an additional $4.4 trillion to low- and middle-income countries.
In the context of the 2025 International Remittance Day campaign, remittances are promoted as a strategic source to bridge the $4 trillion annual development financing gap.
Their impact is to be maximized through increased financial inclusion, accessible digital services, and strategies to channel parts of these funds towards savings, investment, and climate resilience.
While remittances typically address immediate needs, up to a quarter of these incomes are allocated for long-term purposes such as education, healthcare, home purchases, or small business investments. Their decline thus has direct economic implications, from increased personal loan delinquency to reduced housing demand, especially in regions heavily reliant on remittances like the southern and central-north areas of Mexico.
A Global Call to Safeguard This Vital Flow
The Bank of Mexico recently warned that taxing remittances would reverse financial inclusion progress and encourage the use of informal channels.
BBVA Mexico’s analysis estimates that the new tax could reduce annual remittances from the US to Mexico by up to $2 billion.
This year, the focus of international organizations lies in reducing transfer costs, promoting diaspora investment, and fostering policy coherence to ensure these flows contribute to local development.
On this International Day of Family Remittances, attention is not only on recognizing their value but also on protecting them as a fundamental economic right for those working abroad and as a vital resource for the national economy.
Key Questions and Answers
- What are international remittances? International remittances refer to funds sent by migrants to their countries of origin. They play a significant role in supporting families and financing essential services like education, healthcare, and housing.
- Why is Mexico concerned about declining remittances? Mexico is worried due to a 12.1% annual decline in remittances, which account for nearly 5% of national consumption and serve as a primary income source for millions, especially in rural areas.
- What is the proposed US tax on remittances? There’s a discussion about a 3.5% tax on remittances sent by undocumented workers, which could disproportionately affect undocumented Mexicans in the US.
- How significant are remittances to global development? According to the UN, remittances have surpassed official development aid and foreign direct investment in many countries. They are estimated to flow an additional $4.4 trillion to low- and middle-income countries by 2030.
- What are the implications of declining remittances? Besides immediate needs, a quarter of remittances fund long-term goals like education and home purchases. Their decline can lead to increased loan delinquency and reduced housing demand, impacting local economies.
