The exchange rate of Mexican peso against the dollar It used to be devalued, generating uncertainty and loss of assets. The economic crises of the seventies, eighties and nineties were precisely characterized by abrupt devaluations of the national currency. This left a deep mark on the national psyche.
When economic storms were on the horizon, people bought dollars to protect their assets. I am talking, of course, about those with the ability to save.
In 2018, López Obrador's possible victory generated uncertainty. The exchange rate came under pressure. When the current President took office, one dollar cost $20.3 pesos.
However, the biggest risk factor for the national currency in recent years has been Trump. Since he became the Republican candidate in 2016, the peso has gradually weakened. The day he won the presidential election, the exchange rate reached $20.7 pesos per dollar.
It is logical. Trump was against the North American Free Trade Agreement and had promised that, if he won, he would remove his country from said trade mechanism. This threatened Mexico's largest source of foreign exchange: its exports to its northern neighbor.
Fortunately, the Peña and López Obrador governments were able to negotiate a new treaty. However, along the way, there were moments of tension where Trump was on the verge of breaking off the negotiations. In April 2020, the dollar was quoted at $24.8 pesosits highest historical price precisely for that reason.
Since then, the national currency has been appreciating significantly. Yesterday it was quoted at $16.6 pesos per dollar.
We are facing the super weight.
AMLO has boasted this as an achievement of his administration. And of course it is liked by those who still have the trauma of the devaluations of the past. A strong weight gives confidence. In addition, the middle and upper classes can go shopping in the United States where their pesos allow them to purchase more products.
But, in economics, imbalances on one side can be as bad as those on the other. In this matter of the exchange rate, neither so much that it burns the saint, nor so much that it does not illuminate it. The economy does not benefit from significant depreciations or appreciations of the national currency.
In this sense, I am afraid that the super weight is not good news.
Firstly, because Mexican exports have become very expensive. I give a real example. A businessman who exports clothing to the US told me a few months ago that he would stop making money if The dollar fell to less than $17.5 pesos. “If it gets there and continues to go down, I will have to raise my prices. And I don't know if it can compete with Asian exports to the United States anymore.”
This is how all Mexican exporters are: fighting to remain competitive with a super weight that makes their entire operation more expensive.
The reality is that, with the super peso, Mexico is expensive. One can attest to this in the prices of hotels and restaurants in the national territory. If you convert it into dollars, they are the same or even more expensive than in the US.
This, by the way, affects another important source of foreign currency: tourism. Americans and Canadians have to shell out more of their dollars to vacation here. The time will come, if it has not already arrived, when they prefer to go to other, cheaper destinations.
One of the reasons for the appreciation of the peso is the enormous differential between interest rates in the US and Mexico. Since the peso is one of the most liquid currencies in the international market, an investor can borrow in yen, at real rates of zero, and invest that money in pesos at very high real rates. He can even minimize his risk by purchasing currency hedges of both currencies and, with all this cost, still make a profit. Without doing anything, with pure financial operations, it generates money thanks to the high Mexican interest rates.
The problem is for Mexicans that we have to pay these rates in the case of public debt. And in the case of the private sector, also because businessmen transfer this financial cost to their products. If the Cetes interest rate pays 11%, Any business must offer its investors a higher return because, otherwise, it is better to put the money in the bank and let it grow without doing anything and without much risk.
Others harmed by the super peso are the millions of Mexicans who receive remittances from the US. Every day more dollars arrive from our countrymen (and surely from organized crime). But these currencies, with a strong peso, yield less. This affects internal consumption.
About to reach $16.5 per dollar, the level of the super peso worries. It is already burning the saint.
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