Background on the Situation
Cuauhtémoc Rivera, the president of the National Alliance of Small Businesses (ANPEC), predicts that a 1% tax on remittances imposed by the United States will reduce domestic consumption in Mexico by 25%. This prediction stems from the significant role remittances play in Mexico’s economy, with 11.3% of households receiving these crucial dollar-based incomes.
Impact on Specific Regions
Rivera highlighted that families in Chiapas, Guerrero, Michoacán, Zacatecas, Oaxaca, Guanajuato, the State of Mexico, Puebla, and the City of Mexico will be most affected due to their high dependency on remittances. Chiapas, for instance, relies heavily on these funds, with remittances accounting for 14.31% of its GDP.
Current Economic Trends
Rivera mentioned that, amidst the uncertainty caused by the US trade and migration policies, there has been a 75% decrease in visits to ANPEC’s 100 retail points, from 100 last year to just 30 currently. He anticipates further reductions due to the expected decline in remittances.
Misconceptions about Remittances
Rivera dismissed the notion that migrant workers have the financial flexibility to boost remittances before the tax takes effect. He explained that, given their precarious employment conditions and fear of immigration authorities, migrants live paycheck to paycheck.
However, some experts believe that workers may still attempt to increase remittances before the tax is implemented due to their desire to support their families.
Clarity on Remittances
Rivera previously clarified that remittances are not illicit funds. He pointed out that Mexican migrants often work in construction, cleaning, gardening, elderly care, and childcare—jobs that are far from illegal activities.
ANPEC’s Role
With over 250,000 members, ANPEC collaborates with the National Association of Supermarkets and Department Stores, the Mexican Banking Association, and the Coordinating Business Council to provide job opportunities for repatriated Mexicans.
Key Questions and Answers
- What is the predicted impact of the US remittance tax on Mexico’s domestic consumption? Cuauhtémoc Rivera, ANPEC president, anticipates a 25% reduction in domestic consumption due to the tax.
- Which Mexican regions are expected to be most affected by the tax? Families in Chiapas, Guerrero, Michoacán, Zacatecas, Oaxaca, Guanajuato, the State of Mexico, Puebla, and the City of Mexico are projected to be most impacted.
- How has the uncertainty surrounding US policies affected Mexican retail businesses? Visits to ANPEC’s retail points have dropped from 100 to just 30, reflecting the negative impact of policy uncertainty.
- Can migrant workers afford to send more remittances before the tax takes effect? Rivera believes that, given their precarious employment conditions and fear of immigration authorities, migrants live paycheck to paycheck and likely cannot increase remittances.
- Are remittances from Mexican workers considered illicit funds? No, Rivera clarified that remittances come from legitimate employment in sectors like construction, cleaning, and caregiving.
