Remittance tax and weak dollar cut incomes for families in Mexico

Although the Mexican peso has strengthened in recent weeks, millions of families who rely on remittances face a difficult outlook. The new 3.5% tax on money transfers from abroad is compounded by the depreciation of the dollar and a decline in the volume of remittances sent.

Patricia López, one of the many Mexicans who receive financial support from relatives in the United States, sums it up this way: “My husband sends me between $100 and $110 a week. That's enough for food, school supplies, and some basic expenses. But now he's worried: if that tax is imposed, they'll charge him more, and he'll be able to send less. Besides, the dollar has dropped, and he can't earn as much anymore.”

According to the Center for Latin American Monetary Studies, approximately 4.9 million households and 11.1 million older adults in Mexico depend on remittances. However, this vital income could be severely reduced in the coming months.

The Mexican peso reached a new high for 2025, trading below 19 pesos per dollar. Last week, the exchange rate closed at 18.91 pesos, an appreciation of 0.27%, or five cents, compared to the previous day. This peso's strength, driven by expectations of interest rate cuts by the U.S. Federal Reserve and optimism about a new trade agreement between the United States and China, has had unexpected consequences.

“The appreciation of the peso and the possibility of a tax discourage remittances,” warns Lourdes Maisterrena González, an economist at the Universidad Panamericana. “Furthermore, U.S. immigration policy has created an environment of uncertainty. Many undocumented migrants prefer to stop sending money for fear of being tracked or deported.”

Last April, Mexico already experienced a 12% drop in remittance volume, a worrying sign even before the new tax went into effect.

Maisterrena warns that many people may turn to informal channels to send money, which pose a greater risk of fraud and offer no guarantees for the recipients. "It's not recommended. It's best to look for legal options with low fees."

In 2024, Mexico received more than $64 billion in remittances. Of that amount, $5.5 billion went to households in Jalisco.

Guadalajara, on the other hand, received more than $150 million during the first quarter of 2025, ranking third in Mexico, after San Cristóbal de las Casas ( Chiapas ) and Tijuana (Baja California). Monterrey (Nuevo León) and Morelia (Michoacán) round out the top five. In Jalisco, municipalities such as Zapopan, Tepatitlán de Morelos, Ojuelos, and Lagos de Moreno also stand out.

Antonio Ruiz Porras, a professor at the University of Guadalajara, points out that the impact is not only macroeconomic, but also profoundly social. “The bulk of remittance money is spent on consumption: food, medicine, transportation. A reduction in remittances will directly affect the subsistence capacity of many families.”

Only a small portion of remittances is invested in home improvements or small projects. The rest goes to immediate needs. Ruiz Porras emphasizes that, if the tax were implemented, virtually all of these funds would see their purchasing power reduced.

Among the factors that have favored the peso are the possible pause in rate cuts by the Bank of Mexico, the stabilization of the US economy and the announcement by Donald Trump . Trump announced that he would eliminate the 50% tariff on Mexican steel and aluminum. All of this has injected confidence into the markets and strengthened the peso.

However, global volatility remains. The recent conflict between Israel and Iran generated instability in international markets, and at times the dollar rose again. "The peso has had its ups and downs: it appreciates strongly, but any geopolitical event can devalue it," explains Maisterrena.

In conclusion, while the macroeconomy celebrates the strength of the peso, millions of families who depend on remittances are seeing their money go further, arrive in smaller quantities, and potentially be subject to a new tax. Experts recommend adjusting spending, avoiding informal remittance channels, and staying informed about the potential tax impact on their income.

CT