Remittances are an important source of income and foreign exchange for many countries, but they are not a substitute for local development.

Mexico from January to November 2021 received $46.83 billion in remittances – mainly in the United States but also by workers of Mexican origin in other countries sending remittances to individuals in Mexico. This is a 27% increase compared to the same period in 2020, which itself was a record year for remittances. according to finance, which is the highest growth rate in 18 years.

The Bank of Mexico has yet to release figures for December 2021, but barring a sudden sharp reversal, remittances in Mexico in 2021 will exceed $50 billion for the first time ever. This comes after an 11.4% increase to $40.6 billion in 2020, a year in which the U.S. economy suffered its worst annual contraction since 1946, when 98% of remittances came from Mexico.

Remittance inflows to Mexico have risen for the 19th consecutive month. Nearly 124 million remittances were registered between January 2021 and November 2021, an increase of 14.2% over the same period in 2020. They send more amount each time. The average remittance during the period was $378, 11% higher than in 2020.

“Blessings” from Mexico

On Friday, Mexican President Andres Manuel Lopez Obrador (AMLO) describes the trend As a “blessing” to the nation he leads:

“This is the main source of income for Mexico. The December figures are estimates, but I can tell you that we have data before the Bank of Mexico [releases its data] We made a forecast and it basically matches, we are calculating, by December…we’ll be at $51.63 billion…equivalent to 8,000 pesos per month for 10 million households. “

Mexico is not the only Latin American country to see a sharp increase in remittance flows in 2021. according to Latin America and the Caribbean will receive a record $126 billion in remittances in 2021, up 21.6 percent from 2020, according to the latest World Bank forecast released in November. Mexico will account for more than 40 percent of the total.

In most parts of the world, remittances increased in 2021.Although full figures for the year have not been released, the World Bank estimate In 2021, remittances to low- and middle-income countries increased by 7.3% to a record $589 billion:

For the second year in a row, remittances to low- and middle-income countries (excluding China) are projected to exceed foreign direct investment (FDI) and overseas development assistance (ODA) combined. This underscores the importance of remittances to provide a critical lifeline during times of economic hardship in immigrant countries of origin by supporting household spending on essential items such as food, health and education.

The bank expects remittances to grow 9.7% in the Middle East and North Africa, 8% in South Asia, 6.2% in Sub-Saharan Africa and 5.3% in Europe and Central Asia. The only region where remittances are expected to decline in 2021 is Asia Pacific.

The swift and dramatic recovery in remittances has been one of the major economic surprises of the pandemic era, and largely pleasant. In April 2020, at the start of the pandemic, the World Bank painted the bleakest picture for global remittances.As the global economy stagnated and financial markets tumbled, many migrant workers lost their jobs or rushed home, multilateral lenders said. warn Remittances will drop sharply, as happened after the global financial crisis:

Remittance flows are expected to decline across all World Bank Group regions, most notably Europe and Central Asia (27.5%), followed by Sub-Saharan Africa (23.1%), South Asia (22.1%), Middle East and North Africa (19.6%), Latin America and the Caribbean (19.3%) and East Asia and the Pacific (13%).

Fortunately, the forecast was completely off target. Ultimately, global remittances declined by just 1.7% in 2020, and in some regions, such as Latin America, they actually ended in positive territory.This trend has accelerated sharply 2021.

The adverse effects of the COVID-19 pandemic and Hurricanes Grace and Ida have encouraged migrant workers from Mexico and Central America to provide more money to their struggling families at home. Other important drivers include a recovery in the job market and the formalization of financial and social assistance programmes and payment transfers in host countries, meaning that funds are more likely to appear in official records.

Another key factor is the recent surge in the number of people migrating north from Central and South America to Mexico, the United States and Canada, as economic and political instability in the region has grown.For example, Venezuela has seen Outbound immigration increased by 664% Between 2015 and 2020. In 2021, Mexico alone will receive Ten times the number of Venezuelan immigrants Compared to 2020, many of them are trying to get to the US.

More immigration = more remittances

The total number of migrant workers worldwide has more than tripled since 2010, from 53 million to 170 million, according to International Labour Organization (ILO). Migrant workers often end up in jobs deemed essential, many of which are poorly paid. In the U.S., “despite COVID-19, they’re in everything from cleaning services to hospitals to providing services,” Say Sonia Plaza, Co-Chair of the World Bank Knowledge Consortium for Migration and Development (KNOMAD).

Demand for migrant workers could increase dramatically in the coming months if governments in advanced economies go ahead with vaccine mandates, sending millions of unvaccinated domestic workers into the garbage dump amid a severe labor shortage. They will include thousands of doctors and nurses. In their absence, healthcare systems in advanced economies will rely more on overseas workers— according to At the UN, almost a third of doctors in the UK and US are already from overseas – while increasing Chronic shortage of doctors in developing countries.

The arrival of an increasing number of low-skilled immigrant workers could also further depress the wages of low-wage workers in advanced economies, while helping to boost profits for wealthy companies.As American Immigration Economist George J. Borjas famous In a 2016 article politics magazine, while “the influx of immigrants may have potential benefits for the nation, increasing the overall wealth of the population…For many Americans, the influx of immigrants seriously damages their prospects”:

When the supply of workers increases, the price at which firms hire workers falls. Wage trends over the past half century suggest that a 10 percent increase in the number of workers with a given skill could reduce wages for that group by at least 3 percent. Even after the economy is fully adjusted, those skill groups that receive the most immigration will still offer lower wages than those that receive less immigration.

Both low-skilled and high-skilled locals are affected by the influx of immigrants. But because a disproportionate number of immigrants have few skills, it is low-skilled American workers, including many blacks and Hispanics, who will be most affected by the wage decline. The monetary loss is considerable…

[I]Immigrants redistribute wealth from those who compete with immigrants to those who use them—from employees to employers. The extra profits are so great that the economic pie for all the locals is actually growing. I estimate the current “immigrant surplus” — the net increase in the total wealth of the native population — to be about $50 billion a year. But behind this calculation is an even bigger shift from one group of Americans to another: The total redistribution of wealth from homegrown losers to homegrown winners is enormous, roughly $5 trillion a year.

There are other downsides and dark sides to the remittance story, which I laid out in my July 20, 2021 article,”Remittances to Latin America surge as virus crisis continues to spread in host economies“:

For example, there is a brain drain effect as many of the most skilled workers in low- and middle-income countries move to host countries that offer better employment incentives and opportunities. If the process goes too far, it may exacerbate, rather than alleviate, inequality between countries by depriving low-income countries of the best and brightest. Some countries end up facing severe labor shortages. For example, about two-fifths of qualified nurses in the Philippines end up working abroad and now have the lowest number of nurses per capita in Southeast Asia.

This can eventually lead to a vicious circle. The more low-income countries function to provide cheap labor to high-income economies, the more difficult it is to develop a strong domestic economy. As a result, more people are heading to greener shores. Of course, there are countless other pressures driving people in the global South to move north, including climate change, wars on resources and drugs, political instability, and overall economic hardship compounded by the virus crisis.

In Mexico, remittances account for around 5% of GDP, but in some states, such as Puebla, they account for as much as 10% of total income. Dependence is even greater in smaller, weaker economies. In El Salvador, Honduras and Jamaica, remittances accounted for an astounding 26.2%, 26.6% and 23.6% of GDP, respectively. In 2021, remittances to all three countries will increase by more than 20%, in part due to increased immigration to Mexico, the United States and other countries. If capital flows start to dwindle, the impact on the already fragile economies of these countries will be enormous.