13 replies to this topic

[Chivas3]

The Mexican peso, one of the world's weakest currencies since the global economic meltdown began in September, is nearing the 15-to-the-dollar mark -- a stunning loss of value in just six months.

The peso has fallen nearly 32% against the buck since August. That’s a boon for U.S. tourists heading south, but it’s devastating for Mexican consumers’ purchasing power: They have to shell out significantly more pesos for the same dollar.

The peso’s slide continued Monday, when one dollar was worth 14.46 pesos in New York trading, up from 14.35 on Friday and the most since the Mexican currency was reconfigured in the early 1990s. Those are rates for large trades between banks, so retail customers will be quoted different numbers. But the trend is the same.

It was just last summer that the peso was on a hot streak, reaching a six-year high of 9.86 to the dollar in August. At the time, global investors were impressed with how well the Mexican economy had been holding up despite the worldwide slowdown.

It didn’t last: Once the credit crunch took hold with a vengeance in September, and the global economy fell off a cliff, fearful investors began to flee most currencies other than the dollar and the Japanese yen.

The peso has been slammed harder than many currencies because of Mexico’s heavy dependence on the U.S. economy, said Meg Browne, a currency analyst at Brown Bros. Harriman in New York. The assumption is, if the U.S. is in for prolonged hard times, Mexico will follow.

Also, one factor that had been helping prop up the peso last year -- relatively high Mexican interest rates -- is fading. The Bank of Mexico last month dropped its benchmark short-term interest rate for the first time in nearly three years, cutting it to 7.75% from 8.25%. (That's still a far cry from U.S. short-term rates of less than 1%.)

Mexican President Felipe Calderon said last weekend that the government might need to take more  steps to stimulate the economy, which he said was likely to shrink this year.

In an interview with Bloomberg TV from the World Economic Forum in Davos, Switzerland, Calderon wasn’t specific about possible stimulus moves. "I prefer to wait to see the final size of the problem we are facing" before making an announcement, he told Bloomberg. But he said the measures wouldn’t include tax cuts.

The peso's plunge should make Mexican exports cheaper for U.S. consumers. But that could fan protectionist sentiment in the U.S., as the deep recession here makes every remaining manufacturing job more important for the U.S. economy.

[Klort]

Not too sure about Mexico being cheaper... it sure wasn't cheaper for me. You see, inflation always catches up. It will hit the middle class Mexicans the hardest since many have their savings in pesos.

[Chivas3]

Not too sure about Mexico being cheaper... it sure wasn't cheaper for me. You see, inflation always catches up. It will hit the middle class Mexicans the hardest since many have their savings in pesos.

Why would they have it in pesos?

[Klort]

I do distinctly recall the Mexican government seizing banks back in 1982 when the peso started crashing. It went from 90 to 3,000 within a few days. I remember seeing jeeps with soldiers going to banks when I was a little kid in Mazatlan.

Banks will be under tremendous pressure not to give out dollars. If they started doing that, it'll be Portillo all over again.

[George Costanza]

Klort I know one has already announced that they are only giving pesos out not dollar any more.

[Chivas3]

I do distinctly recall the Mexican government seizing banks back in 1982 when the peso started crashing. It went from 90 to 3,000 within a few days. I remember seeing jeeps with soldiers going to banks when I was a little kid in Mazatlan.

Banks will be under tremendous pressure not to give out dollars. If they started doing that, it'll be Portillo all over again.

How bad was the Portillo era, was it worse than the Mexican 90's economic crisis?

[Klort]

I remember my Coke going up from 30 pesos to 1,000 within a month. Those who had their savings in Pesos were very angry. The Americans started flocking over to Tijuana.

My mom bought a few bags of Un Peso coins... it was only $1 for a bag of 3,000 big coins. Good for poker games.

My mother was one of the few trading dollars for pesos, but everybody else was doing it the other way. Portillo panicked and ordered troops to seize banks in Mazatlan. I am sure other banks were affected.

Some Mexicans already changed their pesos to dollars and they were safe, but those who went to the bank after the government took over were not safe. They practically lost everything.

Right now, pesos are still somewhat stable so I think today's economic crisis is not as bad as Portillo's era. Inflation is under control.

[richsinc]

You new here? Or don't read and comprehend well?

There is already an active post about dollars/pesos in the Living in TJ topic.

Wonder if this post by me will be deleted too..............


I was sure it posted and much nicer than this one

[Chivas3]

You new here? Or don't read and comprehend well?

No entiendo el ingles muy bien, tienes problema con Alguien ?

[diogenes]

I do distinctly recall the Mexican government seizing banks back in 1982 when the peso started crashing. It went from 90 to 3,000 within a few days. I remember seeing jeeps with soldiers going to banks when I was a little kid in Mazatlan.

Banks will be under tremendous pressure not to give out dollars. If they started doing that, it'll be Portillo all over again.

I am the son of a CPA, and I remember how back in the 1970's, Mexican Banks were touting US dollar denominated secret bank accounts comparable, legally, to what would be available in a typical Swiss bank, and there was a seminar that my dad, and some fellow CPAs, out of curiosity attended that was hosted by one such bank, although I forget which one. The bank promoters must have read Robert Ringer's Winning Through Intimidation, because they distributed these thick gilded glossy folders, with all kinds of inserts and pictures, something that is called a missionary sales pitch in the advertising world, and there were several alluring Latinas wearing revealing business suits distributing the various promotional materials, and coffee, and miniature Mexican pastries, . It was all quite enthralling, I was told.

So, after the seminar, my pop, and a bunch of his close friends/CPAs got together at another restaurant to discuss what was presented, and I sat in too. Basically, they didn't trust the presenter, because history was against him. In a PRI dominated nation, look what happened to the 300 students in the '68 Olympics, and Mexico's financial institutions weren't quite as well developed as those in Europe, The USA, or Canada. They decided to pass on the offer and not advise their clients to consider such banking options. In 1982, those secret US dollar denominated accounts were converted to pre-devalued pesos, and basically anyone that held that type of account was wiped out.

[Ryu]

In a PRI dominated nation, look what happened to the 300 students in the '68 Olympics, and Mexico's financial institutions weren't quite as well developed as those in Europe, The USA, or Canada.

I love private stories like this, it gives me a window to someone else's life and experiences, thanks for sharing. Also, btw, what happened to the 300 people at the 68 Olympics?

[GreyGhost]

My dentist told me last week that the Mexican gov't has frozen prices on corn, grains, gasoline & other staples people depend on for sustenance...That's helped to stabilize things somewhat.

[Klort]

A few years ago, the Mexican government stopped price controls on tortillas and a few other things.

My mother used to go to Panderia Suzette in Plaza Rio Tijuana, but it closed down a few years ago. There used to be a line for tortillas but now it's gone.

I don't think many companies can continue surviving if the Mexican government continues to regulate prices, especially during inflation. I am expecting Pesos to drop a lot more.

[TJGringo]

You new here? Or don't read and comprehend well?

There is already an active post about dollars/pesos in the Living in TJ topic.

Wonder if this post by me will be deleted too..............


I was sure it posted and much nicer than this one

Richinc don't be so nice, Chivas pay no mind to Rich he seems like a grumpy old man.