STUDIES & Macro Notes

Remittances to Mexico and LatAm in 2021

1. Global remittances growth

  • The World Bank estimates that remittances received by low- and middle-income countries (excluding China) grew 7.3% in 2021, reaching a total of USD $589 bn
    • Latin America & the Caribbean stands out as a region, with a 21.6% growth in 2021
    • The Middle East & North Africa follows with a 9.7% growth, then South Asia with an 8.0% growth
  • The World Bank’s report argues that the growth in Latin America was exceptional in 2021 due mainly to:
    • A strong economic recovery in the U.S., driven in part by the fiscal stimulus the country implemented
    • The strong adverse effects of the pandemic pushed migrants to send home more resources
    • The migrants’ response to hurricanes Grace and Ida, which affected Mexico and Central America
    • Remittances sent to migrants while in transit (received mainly in Mexico by non-Mexicans)

2. International comparison: Mexico and Central America

  • The graph above displays an index showing the relative growth of remittances since 2005 (the base year)
    • For Mexico, remittances received in 2021 were 2.32x those received in 2005 (a 5.4% CAGR)
    • Guatemala is the country in Central America’s “Northern Triangle” that showed the highest growth: its remittances in 2021 were 4.89x those received back in 2005 (a 10.4% CAGR)
    • Honduras and El Salvador also showed considerable growth with 3.88x and 2.40x, respectively
    • For comparison, the Philippines experienced a 2.64x growth, while Colombia grew 2.49x since 2005
  • Furthermore, growth in remittances in the region has been particularly strong during the last 5 years, with the 2016-2021 CAGR being 15.3% for Guatemala, 12.9% for Mexico, 12.6% for Honduras and 9.7% for El Salvador. As comparison, this CAGR for Colombia was 10.0% while it was 3.1% for the Philippines

3. International comparison: relationship with migration

Number of “encounters” in the Mexico-U.S. border and country of origin1

  • The number of “encounters” of Mexican nationals in the U.S. border grew 25.6% in fiscal 2020 and 120.2% in fiscal 2021
  • In addition, from representing 24.3% of total encounters in fiscal 2019, Mexican nationals were 65.0% and 37.8% of total encounters in fiscal 2020 and 2021, respectively

2019-2021 cumulative growth: remittances and encounters in the Mexico-U.S. border 2

  • Considering their growth in the past 2 years, remittances to Mexico increased a cumulative 35.2%, while encounters grew 176.5%
  • In the case of Guatemala, remittances grew 40.8% while encounters did so by only 4.8%
  • In the case of both Honduras and El Salvador, remittances grew faster than encounters

The data shown suggests that, although migration flows play a key role in the level of remittances in general, the most recent accelerated growth in remittances received by Guatemala, Honduras and El Salvador cannot be solely explained by a larger migration to the U.S. (relative to migration from Mexico to the U.S.)

4. Detailed data for Mexico (from Banco de Mexico)

  • Remittances received by Mexico reached USD $51.6 bn in 2021, only second globally to India’s USD $87.0bn and to China’s USD $53.0bn2. This level represents a 27.1% increase relative to 2020 and is 91.1% above 2016
  • The graph above shows that since 1995 the number of transfers has a clearly positive trend, while for the  average size of each transfer the trend is “flat” (basically no change in the shown period)
    • Nevertheless, in 2021 an 11.1% growth on the average transfer amount took place, reaching its historical maximum of USD $378. This figure is clearly above its long-term trend

Except for 2021, the observed values are on or fairly close to their long-term trend. As the World Bank argues, there are several concurring reasons that explain why figures in 2021 are above their trend

5. Growth in remittances by Federal State in Mexico

  • The Federal States that experienced the highest growth in the last 5 years were Chiapas, Tabasco, B.C.S., Quintana Roo, Yucatan and Campeche. It is relevant to highlight that 5 of these States are in the south and south-east of Mexico, including the only two with a CAGR above 20%
  • Federal States that typically receive relevant amounts of remittances in absolute terms like Guerrero, Michoacan, Zacatecas and Guanajuato grew either at the same level or below the national average
  • As a final note, the largest relative growth in remittances in 2021 was experienced by Chiapas (65.7%) and Tabasco (53.9%), which is in-line with the World Bank’s argument that a relevant portion of the remittances received in Mexico in 2021 were sent to Central American migrants that were in transit in Mexico2
  1. Source: World Bank, press release dated November 17, 2021. EOY 2021 figures are. estimates
  2. Source: World Bank. EOY 2021 figures are estimates.
  3. Source: U.S. Customs and Border Protection. Includes those reported by the U.S. Border Patrol and by the Office of Field Operations.
  4. Source: World Bank. EOY 2021 figures are estimates.
  5. Source: Banco de Mexico.
  6. Source: World Bank, press release dated November 17, 2021. EOY 2021 figures are estimates.
  7. Source: Banco de Mexico.
  8. Source: World Bank, press release dated November 17, 2021.

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