(Adds comments from central banker, economist)
MEXICO CITY, May 4 (Reuters) - Remittances to Mexico, one of the country’s main sources of foreign exchange, surged to a record in March, central bank data showed on Monday, as workers abroad likely rushed to take advantage of a favorable exchange rate.
Mexico received $4.02 billion in remittances from abroad in March, a 36% increase from the $2.96 billion in March 2019, the Bank of Mexico figures showed. It compares with $2.69 billion in February.
“The high flow of remittances in March, with a much stronger (dollar) and a moderate inflation rate, brings the 12-month annual flow of remittances in real pesos, their purchasing power, to a new historical peak,” central bank board member Jonathan Heath wrote on Twitter.
Most of the money sent to Mexico comes from the United States, which is home to millions of people of Mexican origin.
“The significant acceleration of remittances in March is difficult to square with labor market conditions and sentiment in the U.S.,” Alberto Ramos, economist at Goldman Sachs, wrote in a note to investors.
“We speculate that perhaps fearing a significant deterioration of the employment and income prospects in the U.S., many workers may have capitalized on a favorable USD/MXN level to send part of their accumulated savings in the U.S. back to Mexico,” Ramos added.
In recent weeks, the Mexican peso has reached all-time lows versus the U.S. dollar as emerging market currencies around the world and broad financial markets took a battering amid the rapid spread of the coronavirus pandemic.
In the first three months of 2020, remittances rose by 18.4% year-on-year to $9.29 billion.
The total number of remittances jumped 15.3% year-on-year in March to 10.6 million, while the average amount per transaction rose 18.1% to $378.
The sharp increase in remittances is a boon for low-income families, who have been hit particularly hard by job and wage losses because of the pandemic. But the relief may not last for long.
“Despite the March upside surprise, the expected sharp recession in the U.S. and spike in unemployment are likely to negatively impact the flow of remittances to Mexico,” Ramos wrote. (Reporting by Anthony Esposito and Abraham Gonzalez; editing by Jonathan Oatis)