The Mexican coin lives the phenomenon baptized as ‘overweight’ after one historical appreciation of more than 12% against the dollar in the first half of the year, a milestone that can be explained with the chain relocation or nearshoringremittances and a favorable outlook for inflation.
The Mexican currency went from a price of 19.5 units per US banknote on the last day of 2022 to 17.12 at the end of the first half of 2023an advance of 12.3%, remaining until the first session of the second half of the year.
(Of Latin America, Mexico is the country with the most digital nomads).
This appreciation occurs after the Mexican peso reached levels of 24 pesos per dollar in the second quarter of 2020, the peak of the covid-19 pandemic in the country.
Mexico
stabilization and appreciation
Enrique Covarrubias, chief economist at Actinver bank, pointed out in an interview that the dynamism in the year is due to the fact that the peso is an asset that depends on supply and demand. “And what has happened is that there has been a lot of demand for Mexican pesos globally for reasons, mostly good.”, he commented.
(Services boosted growth in economic activity in Mexico).
The specialist explained that the peso still has a technical space to continue its progress until the 16.5 units per greenback and reach the tipping point for its stabilization.
He said that the 17 pesos could be a good floor for the stabilization of the Mexican currency, while the consensus of private analysts expects it to close the year at 18.32 pesos per dollar.
While, Gabriela Siller, Director of Economic and Financial Analysis at Banco Base, estimated that the Mexican peso could continue with positive variations until the third quarter of the year and reach 16.9 pesos per dollar. “The so-called superpeso can continue to appreciate even more, especially if the good outlook for the Mexican economy is maintained at the international level due to the opportunity of ‘nearshoring’“, he pointed.
(The Mexican ‘superpeso’, the currency that adds losers and winners).
The analyst indicated that it is required that there is no greater aversion to global risk, because of the war between Russia and Ukraine, as well as in the national field, by economic policies. “Above all, on the autonomy of the Bank of Mexico or that generate the possibility of cuts in the credit rating”, he abounded.
Mexican peso
Both analysts considered that the relocation of Asian companies to Mexican territory due to the commercial blockade of USA to China investment has benefited.
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Covarrubias explained that an analysis of actinver throws that the nearshoring has benefited the exchange rate by up to 2.50 pesos. Another way of looking at it, she said, is that “the exchange rate should be close to 19.50 pesos per dollar, if there had not been ‘nearshoring’”.
Region with largest rate reductions
In addition, the Actinver economist indicated that Mexico is going through a downward trend in inflationwhich could put pressure on interest rate cuts from the Mexican central bank.
(Venezuela’s currency devalued 37.34% against the dollar).
He also foresaw that this effect permeates the entire Latin America during the second half of the year, because “certain political pressures have dissipateds”. In this sense, he contrasted that Mexico has distinguished itself by more favorable economic issues, as a greater demand for Mexican products abroad, investment opportunities, and economic integration with the United States.
Covarrubias highlighted that another great boost has been remittances to Mexico, which since last April registered the highest annual accumulated since there has been a record, for almost 60,000 million dollars. “That’s an impressive number, it’s the equivalent of a full Tesla plant every month.”, he explained.
Mexico
Red flags: public debt and exports
Despite the milestone, Siller qualified that this ‘superweight’ also affects those who receive remittances in Mexico because they will see “the greatest loss of purchasing power“. The Banco Base analyst pointed out that in the administrative field the appreciation of the peso has benefited Mexico due to the reduction of inflationary pressures, due to imported merchandise. While in public finances they are affected by foreign debt.
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The economist also observed that there is damage to exporters who see their value diminished.
While Covarrubias maintained that the greater commercial integration with North America has boosted the productivity of companies in Mexico, which has managed to balance the losses.
EFE
