Latin America Advisor
Latin America Advisor
A Publication of The Dialogue
What Factors Are Driving the Mexican Peso’s Strength?
The Mexican peso on May 15 hit its highest level against the U.S. dollar in seven years. What are the main reasons for the peso’s strength? How likely are the conditions that have been supporting the peso to continue this year? What sectors are most affected by a strong peso, and how is it affecting Mexico’s economy?
Jonathan Heath, deputy governor of the Bank of Mexico: “There have been a lot of structural changes over the past decade that have provided deep changes in the uses and sources of dollars coming into the Mexican economy. Ten years ago, Mexico was a net exporter of oil and relied strongly on foreign portfolio flows. Additionally, the foreign holdings of public debt were relatively high. Back then, the exchange rate was largely determined by flows related to these factors. Today, Mexico is a net importer of oil, has large automotive and tourism surpluses and receives around $60 billion a year in family remittances. Also, foreigners hold much less public debt, and foreign direct investment is far higher. In spite of a relatively large monetary policy rate differential with the U.S. Federal Reserve, Mexico’s economy has experienced net capital outflows. Nevertheless, while the main reason for the peso’s strength has been the weakness of the U.S. dollar, the peso has…”Read More
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About the Latin America Advisor
The Inter-American Dialogue publishes the Latin America Advisor every business day for a distinguished membership of informed corporate leaders, scholars, and government officials invested in Latin America’s development and future. The Advisor‘s highly regarded Q&A section covers questions submitted by subscribers themselves. Commentators regularly include heads of state, business leaders, diplomats, economists, analysts, and thought leaders from around the world. Many of the world’s largest and fastest-growing companies subscribe to the Advisor. To subscribe click here or for more information, contact Gene Kuleta, editor of the Advisor, at firstname.lastname@example.org.
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