- An additional obstacle for those sending money to Mexico this year is the “superpeso.”In relation to the US dollar, the Mexican peso hit its highest point in almost eight years during the summer.
- Families in Mexico that rely on remittances from overseas have seen a decline in purchasing power due to the peso’s quick rise. There are now less pesos received for every dollar sent home due to the currency’s appreciation.
- According to Gabriela Siller Pagaza, chief economist of Banco Base, when combined with internal inflation, the purchasing power of remittances would decrease this year compared to last year for the first time in ten years.
- “For remittance recipients, what really matters is not the dollar amount they receive, but how much they can buy with it in Mexico,” Siller Pagaza explained.
- Banco Base reports that during the August-end calendar year, individuals sent over $62 billion to Mexico. The yearly inflation rate hit 4.64% while the peso gained almost 15.6% throughout that time.
- Per Siller Pagaza, the purchasing power of remittances to Mexico is predicted to drop by 9.9% this year, the largest percentage reduction in 13 years, and the first decline in ten years
- The currency is currently trading at roughly 18 pesos per US dollar this week, down from its peak of less than 17 pesos per dollar in July. The value of one US dollar at the start of the year was 19.46 pesos.
- Those that send US dollars to Mexico are losing more money as a result of the appreciation of the Mexican peso. Individuals who want to send money home from the United States have been obliged to transfer more.
- A person wishing to send 1,000 pesos to someone in Mexico, for instance, would have to send roughly $60 during the peso’s peak in July. It was roughly $49 a year ago.
- One of the people who has had to up their money transfers to their wife and three children who reside in Mexico City is 44-year-old busboy Eric Vasquez, who works at a restaurant in New York City.
- That was prior to my sending $100, Vasquez remarked in front of a money transfer company in Queens, New York’s Corona neighborhood. “[Now] I have to send $130, $140 to cover the expenses,” said he.
- These transfers of funds pay for their kids’ transportation, food, and school expenses.
- According to Vasquez, he has been sending $200 or more to Mexico every week. “The older the children get, the more money you have to send,” he stated.
- Melchor Magdaleno, 33, stated that for the previous three or four months, he has been sending $120 a month to his wife and five children in Tlapa de Comonfort, in the state of Guerrero in southern Mexico. He claimed that he used to send $100 every two weeks, but because of the high expenditures in Mexico and the fluctuating currency rate, he doubled the amount this year.
- The most recent figures show that although inflation in Mexico has decreased recently, it is still rising at 4.45% annually.
- Remittances to Mexico have surged in recent years, according to World Bank economist Dilip Rath, who specializes in remittances. This increase is primarily due to the robust U.S. economy.
- However, Mexican families that depend on remittances to support their family budgets may suffer as a result of the peso’s appreciation, which is connected to the proximate relocation of manufacturing from Asia to Mexico and the robust economies of both the United States and Mexico.
- According to Rath, some families might reduce specific spending in order to manage fixed costs like their mortgage or rent.
- “People will continue to send money, but the fact is that economies are slowing and inflation is rising, their purchasing power is decreasing,” Ratha explained. “There will be a major effect of the illness on wellbeing.”
- After India, Mexico is the country that receives the second-highest amount of remittances globally. Approximately 4% of the nation’s GDP is made up of transfers.
- According to economists, remittances are expected to hit record highs this year as well, but the growth rate will probably slow down as both senders and recipients struggle with rising prices that put a pressure on household budgets.
- And it affects Mexico as well as the United States.
- “Mexicans in the United States and their families at home face high inflation and wage growth in both places has not kept pace,” Ratha noted. “Consumption must change.”
– Translation provided by sharpnews24.com, chief editor, Reshraman.
