FRB Dallas is puzzled at the increase in remittance to Mexico since 2000:
"What's driving the rapid growth of remittances to Mexico? It's a question that has puzzled researchers for years because the most likely economic forces don't seem to be in play. Fundamental factors, such as the size of the Mexican migrant population, their income and the strength of their bonds to Mexico, haven't grown as fast as remittances. Other variables, such as the peso–dollar exchange rate and Mexican economic conditions, have been relatively stable since at least 1996.
What have changed are money-transfer costs, which have plummeted since 2000 (emphasis added), and Banco de México's measurement techniques. Together, these factors likely account for the bulk of unexplained remittance growth in the last few years."
For the full report, click here.
Commentary
Hmmm...this time frame roughly coincides with Wal-Mart's formal entry into the money services business, when the company formed an alliance with Moneygram and slashed the cost of wire transfers. Coincidence? Not likely. This year, Wal-Mart is formerly launching its in-store money service counters, which should drive more volume its way. Thus far, Wal-Mart's entry into money services has been a big winner for consumers, both foreign and domestic, which in the past have relied on high cost channels like check cashing vendors and grocery stores.
