Remittances to Mexico post largest drop in over a decade as peso weakens

MEXICO CITY, Nov 1 (Reuters) - Remittances sent to Mexico recorded their largest annual drop in eleven years in September, down 4.6% from the same month in 2023, according to data released on Friday by Mexico's central bank.

The official data, measured in dollars, was impacted by the Mexican peso's depreciation.

WHY IT'S IMPORTANT

Mexico is the second largest recipient of remittances globally, according to the World Bank, and remittances are one of Mexico's most important sources of foreign currency and a source of pride for the government.

BY THE NUMBERS

In September, remittances reached $5.36 billion, lower than the $5.62 billion recorded in the same month last year.

The figure marks the biggest annual plunge since June 2013, when remittances fell by 4.64% year-on-year.

Coming mostly from the United States, remittances have been affected by the depreciation of the Mexican local currency. By end-September, the peso had weakened over 13% to the U.S. dollar compared with a year ago.

KEY QUOTE

"Measured in local currency, remittances rose 8.7% year-on-year," said head of Goldman Sachs Latin American economic research, Alberto Ramos.

Looking ahead, "the softening of the U.S. labor market and high base for remittances should moderate flows into Mexico in coming quarters," he added in a note.

CONTEXT

Remittances are particularly important for low-income families in Mexico, who rely on these transfers for their expenditures.

However, money sent to Mexico has been the subject of some scrutiny amid reports showing that some drug cartels use them to send illicit earnings back to Mexico. (Reporting by Aida Pelaez-Fernandez; Editing by Marguerita Choy)