The News
Friday 29 of March 2024

Boogeyman Cometh


Peso coins,photo: Notimex/Sabine García
Peso coins,photo: Notimex/Sabine García
This week the Mexican peso was in the spotlight as the second most devalued currency in the world

Surely U.S. president-elect Donald Trump has become the greatest boogeyman the Mexican peso has ever confronted. Like in a terror movie, Trump is striking fear in the hears of Mexicans who on a daily basis reflect it in the exchange market.

Take Wednesday, for instance. The exchange market was holding its breath before The Donald reappeared before his much despised press corps to which he was rude.

Indeed, he should apologize, as he often demands from others, but this guy is indeed a despot and surely will be more so next week when he’s sworn into office.

In many ways he toned down, not about Mexico stealing jobs from the United States, but in the manner in which he referred to President Enrique Peña Nieto, claiming that “he’s a very decent man” and that on the whole, “I like Mexicans.”

But still he hung on to his threat — promise to his voters if you will — that he would build the wall to impede or make illegal crossing of drugs and undocumented workers into the United States more difficult. And he reminded reporters that during his speeches before 25,000 and 30,000 people every time he asked “who’s gonna pay for the wall?,” the mass would respond “Mexico.” Eventually, either through direct payment or concealed taxation of Mexican goods — surely in breach of the North American Free Trade Agreement (NAFTA) — Mexico has to come up with the cost of building it.

Opening up his speech, he said that car manufacturing would move as much as possible back to the USA and that from now, on companies that laid off U.S. employees to take their plants to Mexico, would have their products slapped with countervailing duties. All manufacturing ventures will think twice, depending on how much the tax is, of course. It still could be cost effective to produce in Mexico given competitive wages.

But the boogeyman was ever present in Mexico’s currency market.

Last week the peso weakness became obvious again, as Mexico’s Central Bank (Banxico) director Agustin Carstens felt the pressure again to pull money out of the $176 billion international reserves. And indeed did it, tossing a couple of billion into the exchange market which felt, he said, like pinching someone, as it made no dent and left the reserves at $174 billion.

Moves like this only seek to entice the hunger for peso speculators and exchange houses, as they keep coming back for more greenbacks. On the average, the daily peso-dollar trade in Mexico stands about $20 billion. It won the peso some breathing air as it closed Friday at 21.56.

It must be pointed out that Banxico had not pumped reserve dollars into the currency market since Feb. 19, 2016, nearly 11 months ago, when another two billion was just another morsel tossed to the dollar-hungry pack.

In any case, this week once again the Mexican peso was in the spotlight as the second most devalued currency in the world. Let it be, in consolation to Mexicans, that the Turk lire was the world’s worst devalued mint.

What’s coming up next?

Do worry because the ugly gringo boogeyman is going to get more power as of next week and we do not know when — or how — the much touted renegotiation of the North American Free Trade Agreement will come. This is not an overnight deal negotiation but it will surely come. Till then, tremble, peso, tremble!