Since the start of the 21st century, remittances sent by Mexicans in the United States to their families back home has soared to new heights. In 2018, such flows reached a record high, with international money transfers sent to Mexico climbing rapidly. This increase has had a significant impact on the country, helping to combat poverty and improve the overall financial stability of the nation.
According to a recently released report by the World Bank, Mexicans residing in the U.S. sent an estimated whopping $34.5 billion in remittances back home, setting a new all-time record. That’s a 10.8% jump from the previous year, a higher amount and rate of increase than any other country or region in the world.
Why the Record Remittance Payments?
As of 2018, Mexicans sent the most money to their friends and family in Mexico since the Central American and Caribbean nations began keeping records back in 1990. So, why the unprecedented rate? According to experts, the current economic climate in the United States has created an environment in which Mexicans are more determined to send more cash home for a variety of reasons, including:
• Economic Opportunity: The U.S. economy has been strong over the past several years, and unemployment levels are at near all-time lows. This has generated an abundance of employment opportunities for Mexicans in the U.S., resulting in more money being sent back home.
• Increased Use of Technology: Online services have made it easier than ever for Mexicans in the U.S. to send money abroad. Innovative technology, especially mobile apps, has accelerated international remittance transactions, stimulating more transfers of finances from Mexican immigrants.
• More Available Options: In addition to advanced technological applications, sophisticated marketing and partnerships among different companies have made more affordable options available to Mexicans in the U.S. looking to send money home.
Challenges in Making Remittances
As beneficial as remittances can be to the Mexican economy, there are still some significant challenges associated with making effective transfers. The key to mitigating such issues lies largely in how can laws and regulations can be updated to more effectively reduce the cost associated with making remittances. Some of these challenges are as follows:
• Expensive Fees: Currently, the fee to make such transfers instantly is around 8% of the amount transferred, while the fee for transfer delays could add up to nearly 10%. The cost of these services is too expensive and favors only financial businesses rather than those sending the money.
• Confusing Regulations: Regulations involved in making international remittances between the America’s and Mexico are also outdated and confusing. Such legislation has failed to keep up with advances in technology and the lack of trust among financial institutions.
• Unstable Exchange Rates: Exchange rates are another issue that impede remittance payments. Unstable rate fluctuations are hard to predict and can lead to significant losses if not managed appropriately.
Recent Push for Innovative Solutions
In response to these challenges, the governments of the United States and Mexico are leading an effort to create an innovative digital system for international remittances. Lawmakers from both countries convened in Mexico City to discuss how to streamline this process and make it easier for Mexicans overseas to send more money home. Leading the meeting was Global Innovation Policy Director Brian Kingston, who has made significant strides to create a sustainable and safe digital payments system with the following proposed initiatives:
• A Level Playing Field: Requiring international money transfer providers to display prominently the fees associated with their services and beefing up consumer protections against fraud.
• Reduced Fees: Leveling the playing field by introducing standardized fees across the board to ensure that payment providers play fair and offer competitive rates.
• Improved Data Governance: Developing better data governance protocols to ensure the effective, secure, and efficient transmission of funds of all levels.
• Improved Regulatory Environment: Enhancing oversight over the sector, making sure all players are working within the remittance regulations.
• Strengthening Market Integrity: Establishing partnerships to protect consumers from suspicious transactions, as well as encouraging responsible lending among financial service providers.
These initiatives are all part of a broader effort to increase transparency and boost the efficiency of the international money transfer system. It’s also spending government efforts to develop partnership and trust with all stakeholders to ensure everyone is operating within a robust and secure system.
How the 2018 Remittance Record Impacts Poverty Levels
The 2018 record amount of remittances sent by Mexicans in the U.S. to their families in Mexico has had a substantial impact on poverty levels in the country. According to the World Bank, the 10.8% increase in payments was enough to lift 6 million Mexicans out of poverty. The organization also reported that since 2008, remittances to Mexico have risen by a whopping 50%.
Other Critical Factors in Poverty Reduction
The record amount of remittances transferred to Mexico in 2018 is just one part of a larger effort to reduce poverty in the country. There are other important initiatives and programs in place to combat extreme poverty levels, including:
• Fostering Human Capital: Investing in human capital, such as education, health, and social protection, to ensure children and adolescents have the best opportunity to reach their full potential.
• Enhancing Food Security: Increasing food security and nutrition by getting better access to food and improved production standards.
• Improving Access to Basic Services: Expanding access to basic services, including water and sanitation, energy, and housing.
• Strengthening Social Inclusion Policies: Maximizing the potential of vulnerable groups. This includes focusing on Indigenous peoples, immigrants, refugees, and victims of violence in Mexico.
Making record remittances from Mexicans residing in the U.S. back to their families in Mexico is an important aspect of reducing poverty levels in the nation. With the help of government initiatives and technological advances, it’s been easier than ever to boost payments made by Mexicans in the U.S. back home. However, reducing the high remittance fees, as well as improving financial data governance and regulatory environment, remains crucial in creating a more efficient, secure, and cost-efficient platform for international transactions.
