Mexicans living in the U.S. are sending less money home. In 2009, remittances to Mexico totaled $21.5 billion, a 15 percent decline from 2008. With the exception of October 2008, remittances have been decreasing since mid-2007.Mexico ; Emigrant remittances ; Economic conditions - United States

Jesus Canas

Roberto Coronado

English

Research Papers in Economics

SpotLight
SouthwestEconomy    FEDERAL RESERVE BANK OF DALLAS •FiRSt quARtER 2010 14
Mexicans living in the U.S. are sending 
less money home. In 2009, remittances to 
Mexico totaled $21.5 billion, a 15 percent de-
cline from 2008. With the exception of Octo-
ber 2008, remittances have been decreasing 
since mid-2007 (Chart 1). 
Remittances represent significant income 
for  Mexico’s  economy.  In  2008,  inflows  of 
$25.3  billion  equaled  roughly  3  percent  of 
Mexico’s GDP and nearly 60 percent of oil-
export revenues, and they exceeded foreign 
direct investment by 30 percent. 
The money from abroad is important for 
many  families  in  poorer  regions  of  Mexico, 
such as the south and west. Remittances in-
crease consumption and reduce poverty, and 
they have been found to spur entrepreneur-
ship and schooling among recipients.1
Most  research  identifies  migrants’  in-
come as the main driver behind remittances, 
suggesting  a  positive  correlation  with  eco-
nomic conditions in the sending country. So it 
shouldn’t be surprising that remittances began 
to fall with the downturn in the U.S. economy 
as measured by the coincident index, which 
peaked in late 2007 (Chart 2). 
The timing coincides closely with the na-
tionwide housing bust and fall in construction 
employment. A 2007 Banco de México survey 
found that nearly a fifth of migrants who sent 
money home worked in the U.S. construction 
sector. Remittances kept rising in the 2001 re-
cession, which didn’t see a housing bust.
The size of the Mexican migrant popu-
lation in the U.S. also influences total remit-
tances.2 A recent study by the Pew Hispanic 
Center didn’t find Mexican immigrants return-
ing home in large numbers; however, it did 
confirm a significant decline in the flow of 
new migrants to the U.S. in the past few years, 
likely  a  response  to  dwindling  employment 
opportunities.3  Mexican  demographic  data 
also indicate that net emigration fell 61 percent 
from its 2006 peak to 2009.4
Two factors that impact remittances prob-
ably  haven’t  contributed  to  recent  declines. 
The cost of transferring money to Mexico fell 
in the first half of this decade and remains low, 
so remittance fees can’t explain a decline in 
migrants’ transfers since 2007.
In fall 2008, the dollar appreciated against 
the peso amid the financial crisis. A cheaper 
peso should provide incentives for migrants to 
send more money home, where a dollar can 
buy more. However, exchange rate changes 
weren’t large enough to reverse the downward 
trend in remittances. 
Recent data suggest the U.S. economy is 
starting to recover, and the U.S. housing mar-
ket may be bottoming out. Job growth has yet 
to revive, but forecasters anticipate real GDP 
growth of 3 percent in 2010 and 3.1 percent 
in 2011. Renewed growth will likely encourage 
migration, restoring remittances. However, com-
mercial construction is still declining, suggesting 
the rebound in remittances might be slow.
—Roberto Coronado and Jesus Cañas 
Notes
1 See “Remittances and Poverty in Mexico: A Propensity 
Score Matching Approach,” by Gerardo Esquivel and 
Alejandra Huerta-Pineda, Integration and Trade Journal, 
no. 27, 2007, pp. 45–71; “Globalization, Migration and 
Development: The Role of Mexican Migrant Remittances,” by 
J. Ernesto López-Córdova, Economía, vol. 6, no. 1, 2005, pp. 
217–56; and “Migration Networks and Microenterprises in 
Mexico,” by Christopher Woodruff and Rene Zenteno, Journal 
of Development Economics, vol. 82, no. 2, 2007, pp. 509–28. 
2 See “Explaining the Increase in Remittances to Mexico,” by 
Jesus Cañas, Roberto Coronado and Pia Orrenius, Federal 
Reserve Bank of Dallas Southwest Economy, no. 4, 2007. 
Economic conditions in Mexico also matter, but research 
provides inconclusive results regarding the direction of the 
impact on remittances. 
3 See “Mexican Immigrants: How Many Come? How Many 
Leave?” by Jeffrey S. Passel and D’Vera Cohn, Pew Hispanic 
Center, Washington, D.C., July 2009.
4 Estimates based on second-quarter data from Encuesta 
Nacional de Ocupación y Empleo, Instituto Nacional de 
Estadística y Geografía.
Cross-Border Money Flows Slowed by U.S. Slump
Remittances to Mexico
Chart 1
Mexico’s Remittances Show Rare Decline
Year-over-year growth rate (percent)
–60
–40
–20
0
20
40
60
80
’09 ’08 ’07 ’06 ’05 ’04 ’03 ’02 ’01 ’00 ’99 ’98 ’97 ’96
NOTES: Remittances have been adjusted for inflation and seasonal factors. Shaded areas represent 
U.S. recessions.
SOURCES: Banco de México; authors’ calculations.
Chart 2
Remittances Track U.S. Business Cycle
Index, January 2000 = 100  Billions of dollars monthly
U.S. construction employment
80
85
90
95
100
105
110
115
120
’09 ’08 ’07 ’06 ’05 ’04 ’03 ’02 ’01 ’00
0
.5
1
1.5
2
2.5
3
Remittances
U.S. coincident index
NOTES: Remittances have been adjusted for inflation and seasonal factors. Shaded areas represent 
U.S. recessions.
SOURCES: Banco de México; Conference Board; Bureau of Labor Statistics; authors’ calculations.

Spotlight: remittances to Mexico: cross-border money flows slowed by U.S. slump

http://www.dallasfed.org/assets/documents/research/swe/2010/swe1001d.pdf

Spotlight: remittances to Mexico: cross-border money flows slowed by U.S. slump

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