We’re wearing mittens inside the office here at the Mexico Business Blog Global Campus, but chilly temperatures in the black heart of the Mexico City winter are the least of our worries as financial markets plummet and the dollar skyrockets. The peso started off 2015 in the neighborhood of 14.6 to the dollar and continued to inch up throughout the year. Pundits routinely speculated that the dollar would come back down by year-end, but by the second quarter central bank Banco de México (Banxico) was selling off dollars to ease pressure on the peso. When the dollar broke the 17-peso barrier in the third quarter foreheads began to perspire, and now that we’ve surged past 18 pesos to the dollar, the question isn’t when to panic, but how to go about it. Continue reading Exchange rate rattles nerves in Mexico
In the run-up to this weekend’s G20 meeting in Huntsville, Ontario, much ink has been spilled regarding the value of the Chinese currency. Economists, pundits and observers of all stripes have taken positions on various sides regarding the question of how much and how fast the yuan (or Renminbi, if you prefer) needs to appreciate against other major currencies. And, of course, how willing Chinese authorities are to allow this to happen.
Hypothetical scenarios projected in some circles of a rapid appreciation of 40% have China’s export competitors salivating. Basic trade theory holds that by hiking the value of the yuan, Chinese exports become more expensive, making competing products made in countries such as Mexico that much more cost competitive. Gaining ground of this type is seen as critical in the hotly disputed U.S. market for goods such as appliances and electronics. Trade data for 2009 suggests that Mexico is already gaining some overall market share from China in the United States, and we have touched on the relative cost competitiveness between Mexico and China in this space before.