Ever wonder what effect the people transferring money into Mexico – including immigrants, citizens or “unofficial” residents – has on Mexico’s economy?
The Mexican government states that remittance made up approximately $25 billion of the countries $1.6 trillion Gross Domestic Product (GDP) in 2008. The government also says worker transfers into Mexico has yet to account for 1% of Mexico’s GDP.
Many argue the validity of these claims however, since many of those Mexican workers sending money back home do so without presenting I.D. since they are “unofficially” making a living in the United States. Similarly, the recipient is not required to present identification either. So how is this possible?
Many offline services allow people to transfer money into Mexico using just a password. The recipient then writes a secret code on a form or tells it to a cashier. It is not yet known the amount of money “unofficially” sent this way by Mexican workers “unofficially” in the U.S.
What is clear is the massive effect money coming into rural Mexico has on the people receiving it. Whether it comes from a resident alien, citizen or an unofficial resident, it even has an impact on Mexico’s urban population too.
When people send money to Mexico, they not only turn to wire services, they also entrust banks to get the money there.
Unfortunately for the economy, people aren’t sending as much money as they used to. The figure dropped from $26 billion U.S. in 2007 to $25 billion in 2008 and Jesus Cervantes, director of statistics of the Mexican’s central bank warns that the outlook is grim for 2009.
The number might possibly have something to do with the fact that many of the Mexicans who migrate to the U.S. most often work in the construction industry, which has taken a hard hit in the recent recession.
Even still, continue to transfer. And even despite the falling numbers in recent years, it’s still 3 times the amount in 2001.
Questions still remain regarding the method people choose to wire money. Will people choose more traditional offline wire service methods, or lean towards the newer trends in pre-loadable, re-loadable credit or debit cards, a new quick and cheap way of transferring money.
Many U.S. services today already allow recipients in Mexico to get the money on the same business day, but many turn to re-loadable cards since it’s easier than using location-based services in case your recipient does not live near one. Also, to add money you just have to jump online and pay about five dollars – what can be easier than that?
Regardless of the service customers prefer or the percentage of Mexico’s GDP transfers make up, its effect is massive on those receiving it.
