Thread: Mexican Worker Money Transfers Drop at a Record Pace

Mexican Worker Money Transfers Drop at a Record Pace (Update3)

By Valerie Rota and William Freebairn

March 5 (Bloomberg) -- Mexicans working abroad, mostly in the U.S., reduced money transfers to their families at home at a record pace in January as a U.S. housing slump squeezed construction employment.

Remittances, the second-biggest source of dollar flows into Mexico after oil exports, fell 5.9 percent in January to $1.65 billion from a year earlier, the central bank said today. It was the biggest decline since Banco de Mexico began records in 1995.

The drop may crimp spending by Mexican families and reflects weakness in U.S. construction, the biggest employer of Mexico's migrants. Wal-Mart de Mexico SAB, the nation's largest retailer, fell for the first time in three days in Mexico City trading.

``What's a little disturbing about the data is that, at least historically, remittances tended to turn up when the Mexican economy was showing some slowing,'' said Gray Newman, chief Latin America economist at Morgan Stanley in New York.

Mexico's government expects economic growth to slow to 2.8 percent this year from 3.3 percent in 2007 because of slowing demand in the U.S., which buys about 80 percent of Mexican exports.

Walmex, as the Mexican unit of the Bentonville, Arkansas- based company is known, fell 1.6 percent to 40.21 pesos. The stock has fallen 6.7 percent in the past 12 months, compared with a 14 percent gain in the benchmark Mexican equity Bolsa index.

The company partly attributed weakness in sales growth last year to sluggish money transfers from the U.S., which cut into the buying power of lower-income Mexicans.

``It hits them the most at stores in the central part of the country,'' Maria del Carmen Negrete, an analyst who covers Walmex at BBVA Bancomer SA, said in a telephone interview from Mexico City.

Mexico City and the central states of Mexico, Guanajuato, Jalisco, Michoacan, Puebla and Veracruz receive the biggest amount of remittances in the country, according to the central bank.

The U.S. construction industry accounts for about 20 percent of jobs for Mexicans living in the country, according to the central bank. Almost 90 percent of transfers go to consumption.

Today's report comes two days after the Mexican government announced a 60 billion peso ($5.6 billion) stimulus package to help shield the economy from a slump in the U.S. Finance Minister Agustin Carstens said the measures, a mix of tax cuts and spending increases, give him more confidence in their economic growth forecast of 2.8 percent this year in Mexico.

Remittances grew 1 percent last year to $24 billion after a record 39 percent expansion in 2003. Mexican Central Bank Governor Guillermo Ortiz said on Jan. 30 he expected remittances to stay flat this year.

Mexican consumer confidence last month fell the most since October, a government report showed today. The consumer confidence index dropped to 101 from 103.5 in January. Economists had forecast a reading of 103, the median of seven estimates compiled by Bloomberg shows.

``Consumers may be less optimistic about the future because of current food and energy price inflation,'' said Guillermo Aboumrad, senior economist at Banco UBS Pactual in Mexico City. ``They have less money to spend on other things.''

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The company partly attributed weakness in sales growth last year to sluggish money transfers from the U.S., which cut into the buying power of lower-income Mexicans.

Biting tongue............

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