Every month Pedro goes to his local bank branch in Oaxaca to withdraw the money his relatives send him from the US. And he’s far from alone. Millions of Latin Americans repeat this same scene across the region, from Mexico to Argentina.
A vital part of the Latin American economy, it’s estimated that remittances will reach US$61 billion in 2013. A large part - some US$ 22 billion - is destined for Mexico. This places it in fourth place behind India, China and the Philippines in a global ranking for remittances according to a new report by the World Bank.
Although Mexico continues being, by far, the country which receives the most remittances, the slow recovery of the US economy has had a significant effect on money being sent to the country, both in the amount of remittances sent as in their value.
According to the study, Mexico is the only major recipient country in the world which has seen such a drop in remittances received this year. The flow of money has also been affected by new American regulations which tighten controls to avoid the illegal transfer of money from the country.
Such restrictions are already causing the closure of remittance service providers’ bank accounts. This has resulted in some Mexican banks which are still active to levy new fees to withdraw money, which increases the cost to those receiving the sums.
“A rather unwelcome development in recent months is the imposition, by many banks, of receiving or “lifting” fees on incoming transfers. The lifting fee is yet another example of the lack of transparency in pricing that pervades the remittance industry,” the report explains.