With fears the Trump administration will tax or block south of the border cash transfers, remittances sent to Mexico from the United States jumped 15 percent in March from the same period last year – marking one of the largest cash transfers from Mexicans living north of the border to friends and family back home.
Mexico’s central bank, Banxico, reported that around $2.5 billion in cash transfers were sent to the country from the U.S. last month, compared to $2.2 billion a year earlier — and making March the third largest in U.S.-Mexico remittance history. In October 2008, individuals sent to Mexico $2.6 billion and in May 2006 $2.5 billion went to the country.
“This is due to uncertainty about the measures that Trump has announced, such as preventing any undocumented people from sending money abroad or applying a remittance tax of up to 5 percent,” Juan José Li Ng, a senior economist at BBVA Bancomer, told Reuters.
Banxico figures also indicated that the number of operations and the size of each transaction also rose in March. The size of the average transaction increased 24 percent, from $291 to $316, and the total number of operations jumped 6.1 percent, from 7,517 a year earlier to 7,976.
While traditionally remittance totals tend to drop off in January, in the wake of the Christmas holiday spending season, and then pick up in February, this was not the case this year — where the first two months of 2017 both netted more than $2 billion in remittances.
Remittances became a major concern for many individuals in the U.S. with relatives in Mexico after President Trump threatened on the campaign trail last year to either tax or block cash transfers.
“That absolutely captures attention here,” reporter Franc Contreras, who lives in Mexico City, told PRI. “It grabs attention, it makes people frightened a little bit.”
The U.S. currently does not tax remittances as they are transfers of previously owned money rather than payments for goods or services. Mexico also does not tax those who receive remittances as long as the transfers are for less than a predetermined amount.
Remittances are the country’s second-largest source of income after automotive exports. Last year remittances rose to almost $27 billion, the highest on record, far surpassing the $15.6 billion Mexico earns from oil exports and the $17.5 billion in tourism income Mexico received in 2015.
Trump’s victory last November also sent the Mexican currency to record lows in a sell-off fueled by his threats to scrap a U.S.-Mexico trade deal and levy punitive tariffs on Mexican-made goods.