Coronavirus: Impact on Mexico's Economy

Back in mid-May, I looked at how COVID-19 was impacting Mexico. At the time, Mexico's COVID-19 czar predicted that only 6,000 would die from the virus. As can be seen by Worldometers, deaths due to the virus are far greater than 6,000. In fact, on a deaths per million basis, Mexico are around the levels seen in the United States. It is possible that the country has deaths that are much higher than the United States. In that same mid-May blog post, I pointed out that Mexico was guilty of under counting deaths. It is possible that this Fox News (Sep 6) indicates how bad the situation is: 

Parts of Mexico have run out of death certificates as the country’s death toll from the coronavirus continues to soar, according to reports.

. . . One million new certificates have been printed and are being distributed, they said. The certificates include special characteristics because falsification has been a problem in the past.

. . . New government figures show deaths in Mexico from March to August from all causes were 122,765 more than what would be expected in a normal year, Bloomberg News reported.

I don't know, would closing in on 80,000 deaths over a period of 7 months result in the country running out of death certificates? Even 122,765 extra deaths?

The pandemic in Mexico has resulting in a severe economic impact for the middle class. The Los Angeles Times (Sep 5) reports:

The pandemic has driven Mexico into its deepest economic downturn since the Great Depression, with 12 million jobs already lost, 150,000 small businesses closed and the economy expected to contract by as much as 12.8% this year.

. . . “I think this is going to be horrendous in terms of increasing inequality,” said Juan Carlos Moreno-Brid, an economist at the National Autonomous University of Mexico. Even in the unlikely event that Mexico recovers quickly, he said, it could take until 2028 to restore the average income of a decade earlier.

. . . Home sales in the state have fallen by 40% this year, and about half of the 80 new housing developments that were under construction have been put on hold.

Those of Mexican ancestry in the United States are helping relatives in Mexico deal with the economic fallout. Los Angeles Times (Sep 8) reports: 

Mexico received $3.53 billion in remittances in July — most of it from the U.S. — a 7% increase over the same month in 2019, Mexico’s central bank data showed.

Even as the unemployment rate in the United States soared to 14.7% in April, and the World Bank predicted global remittances would tank by about 20%, Latinos working in the United States baffled economists by sending more money home to Mexico and Central America than ever before.

. . . The funds are a major help for the Mexican economy and low-income families across the country, supporting approximately 1.5 million families, according to the Mexican federal government.

. . . Migrant workers in the U.S. sent home $330 million to Baja California between April and June 2020, according to the latest figures from Mexico’s central bank.

Now I'm not sure how the numbers add up, but the article states that $330 million was sent back to Mexico by migrant workers from April through June (3 months), but $3.53 billion was sent back to Mexico (not all, but most from the US) in just the month of July. To me, this indicates that a significant percentage of remittances are by US citizens. 

Unemployment jumped from a low of 3.5% in 2019 to 14.7% in April. Yet, remittances for the month of July increased by 7%? Here's something that wasn't explored in the article as a possibility for why remittances increased. Is it possible that the additional $600 unemployment benefits are part of the reason why remittances have increased? 

Here's my scenario: what if someone made $30,000 a year (about $15 an hour) prior to the pandemic. The person got laid off. What would that person's new annual income look like while on unemployment? First, there was the $600 in additional unemployment benefits, which equates to $31,200 on an annual basis. Then add on top of that the baseline unemployment benefits by the states. In California, earning $30,000 a year would result in unemployment benefits of $289. That would come out to just over $15,000. Then add in the $1,200 stimulus check. In my example, someone making $30,000 a year and then getting laid off would get the equivalent of slightly over $47,400. Would that individual be able to send additional remittances to Mexico? Yes. I haven't done a scenario analysis, but someone making $47,400 would also get a pay increase as the baseline unemployment benefits would increase above $289. I wish the LA Times article had at least considered that possibility.