Could Trump's migrant crackdown spur remittances to Mexico?

The record-breaking growth of family remittances to Mexico in recent years is showing signs of deceleration; however, a resurgence could be in the wings as a result of President Donald Trump’s increasingly hardline immigration policy.

"People have increased the amounts as a preventative measure, to create a capital [reserve] within Mexico as they anticipate having to leave the US,” said Rolando Cordera Campos, a professor emeritus in economics at the Mexican UNAM university, in a recent post in the university gazette.

Tougher anti-immigration measures in the US and the perception of a weakening peso, could help propel remittances to as high as US$39bn in 2019, said Jesús Cervantes, head of economic statistics at Latin American monetary studies entity Cemla, in an interview with local daily El Economista.

According to central bank data, Mexico received US$33.5bn in remittances in 2018 – the highest level for any year on record, marking 10.5% growth from 2017.

Hitting US$39bn would require remittances to grow 16.5% this year, which appears difficult given that the year-on-year increase in January-April was 5.8%.

In making his case, Cervantes points to the World Bank’s April estimate that remittance flows to low- and middle-income countries should reach US$550 bn in 2019. And while the World Bank sees remittance growth in Latin American and Caribbean slowing to 3.9% this year from 9.5% in 2018, the Cemla expert sees potential for an accelerate pace of remittances growth if there is a harsh migration crackdown in the US.

Trump gave a two-week deadline on Sunday for legislators to meet demands on changes to immigration law before starting what he simply warned would be “big deportation."

While deportations could heavily lean towards Central American migrants, potentially hundreds of thousands of these will likely be stuck in Mexico in the months ahead, with many potentially looking to pick up remittance payments at nearby locations.

Banorte economists Juan Carlos Aldrete and Francisco Flores said in a research note that deportation fear among undocumented Mexican migrants in the US likely played a role in the 3-5% growth in the number of remittances transactions in March and April, but it is doubtful this will have a significant impact on the annual remittances flow.

“Although higher uncertainty among migrants could induce higher inflows, it is our take that this will not be enough to result in higher growth in remittances when compared to the previous year as economic activity would eventually impact on employment levels,” wrote Aldrete and Flores.

“On a more positive note, we do not foresee an outright contraction as long as the US does not fall into recession, which is not our base-case scenario despite a higher probability given the escalation in trade tensions and the accumulated effect of tighter global financial conditions,” they said.