Remittances to grow in Mexico and Central America

Subject

With the dollar strengthening against many local currencies, remittances are on the rise.

Significance

The strengthening of the dollar has seen remittance figures in Mexico and Central America rise recently. While the weight of remittances varies greatly across Latin America, Mexico is by far the most important recipient in the region. However, the weight of remittance transfers in the Mexican economy only has a significant impact in certain areas, while in several Central American countries, notably El Salvador, they are vital to overall private consumption.

Impacts

• As the US economy gathers strength, remittances should continue to grow, albeit at single-digit rates.
• While the economic relevance of remittances should decline in Mexico, it will continue increasing in Central America.
• Governments are faced with the challenge of redirecting the use of remittances from spending to investment.