Money transfers to Mexico from workers living abroad climbed to a record last year as Donald Trump’s election raised the prospect of the U.S. blocking the flow of cash to make its southern neighbor pay for a border wall.
Remittances rose 6% in December from a year earlier to $2.34 billion, the most ever for the holiday season, according to data released by Mexico’s central bank on Wednesday. The increase brings 2016 transfers to $27 billion, exceeding the previous high from 2007, before the financial crisis and U.S. recession. The December increase was less than the 11 percent median forecast by economists in a Bloomberg survey and compared with the surge of 25% in November, the immediate aftermath of Trump’s win.
During the 2016 campaign, Trump floated the idea of blocking remittances to make Mexico pay for a $10 billion border wall that he said would stop undocumented immigration. The transfers provide a lifeline for some of Mexico’s poorest households and communities, who depend on relatives working in kitchens and construction sites from California to Maine. Overwhelmingly coming from the U.S., the remittances were equivalent to about 2% of Mexico’s gross domestic product in recent years, exceeding oil revenue and rivaling foreign direct investment.
"We think two factors in particular are driving such strong gains: the sharp peso depreciation and fears that the new U.S. administration might implement measures that hinder remittances," Gabriel Lozano, JPMorgan Chase & Co.’s chief economist for Mexico, wrote in a research report before Wednesday’s release. "Both are likely leading workers to frontload their remittances aggressively."