Remittances to Mexico Fall For First Time, To $25 Billion in 2008

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MEXICO CITY -- Mexicans living and working abroad sent home nearly $25.15 billion last year, 3.6 percent less than in 2007, Mexico's central bank said.

It was the first annual decline in remittances since Mexican authorities began keeping track of what has become the country's second-biggest source of revenue after oil exports, Banco de Mexico said.

The annual percentage increase in remittances remained in double digits from 2001 through 2006, registering a whopping 53.3 percent gain in 2003.

Banco de Mexico attributed last year's fall in remittances to the recession in the United States, where an estimated 12 million Mexican expatriates live and work, many of them illegally.

The central bank also acknowledged the effect of tighter border controls that make it harder for undocumented Mexicans to enter the United States and said remittances will likely fall further amid the worsening slowdown in the U.S. economy.

The bank predicted Tuesday that Mexico will enter recession in 2009, with a decline of as much as 1.8 percent in gross domestic product rather than the small increase government economists had forecast earlier.

World economic activity is undergoing a contraction "not seen in decades," Banco de Mexico chief Guillermo Ortiz told a press conference, explaining the rationale for the revised forecast.

He cited preliminary data showing that the Mexican economy contracted at an annualized rate of around 1 percent during the fourth quarter of last year.

Mexico's central bank also estimated that GDP expanded only 1.5 percent in 2008, and not 2 percent as calculated earlier.

The bank said job losses last year in the formal economy totaled around 37,000 and that 2009 could see the elimination of between 160,000 and 340,000 jobs.