Mexico Remittances Plunge In Worst Drop On Record

Mexico remittances plunge in worst drop on record

The Associated Press
July 1, 2009, 3:12PM

MEXICO CITY—Money sent home by Mexicans working abroad fell by 19.9 percent in May, the biggest monthly decline on record as the U.S. recession slashed jobs.

Remittances dropped to $1.9 billion from $2.4 billion in May 2008, the central bank said on Wednesday. The amount of money sent home in the first five months of 2009 fell 11.3 percent to $9.2 billion compared with the same period last year.

Remittances are the second-biggest source of foreign currency after oil exports in Mexico, and their decline has contributed to the country's own economic downturn.

Mexico's economy shrank by 8.2 percent in the first quarter from the same period last year, putting it on track for the worst recession since the so-called Tequila Crisis of 1995.

The economy is likely to shrink by 6.3 percent for the year, according to a survey of 31 financial institutions released by the central bank on Wednesday. Last month's survey forecast a 5.8 percent contraction while the government predicts 5.5 percent. The monthly poll forecast that growth will recover to 2.1 percent next year.

Mexico has been pummeled by the recession in the neighboring United States, where nearly 12 million Mexican citizens live. Fewer jobs there and a crackdown on illegal immigration have reduced the number of migrants heading north, decreasing the number and average amount of money transfers home, the bank said in its report.

But job prospects are not much better in Mexico, as the U.S. recession slashes demand for exports in the United States, which buys about 80 percent of Mexican goods sold abroad. The swine flu, which shuttered businesses and slashed tourism nationwide, is also thought to have cost the country at least $2.2 billion and countless jobs.

Analysts surveyed by the central bank now expect Mexico to lose 656,000 jobs this year, compared to last month's forecast of 592,000. The country's population is about 107 million.

Mexico, the world's third largest recipient of remittances after India and China, has seen them fall since late 2007. The worst previous monthly drop came in April, when they declined by 18.7 percent, according to central bank data.

May's decline was the worst registered since the government started keeping records in 1996.