Sunday, June 16, 2024

Historic advance for peso during AMLO’s first 100 days

The Mexican peso appreciated by 4.72% in the first 100 days of President López Obrador’s term in office, the currency’s best performance ever during the same period of any new administration.

The only other president who saw a stronger peso at the conclusion of his first 100 days was Enrique Peña Nieto but the currency’s gain against the United States dollar was a more modest 2.37%.

At the end of Felipe Calderón’s first 100 days as president, the peso was down 1.48% while Vicente Fox saw a 1.78% decline in the currency’s value.

The peso also lost ground against the U.S. dollar in the first 100 days of the administrations of Ernesto Zedillo, Carlos Salinas, Miguel de la Madrid and José López Portillo.

Before López Portillo’s presidency, which began in December 1976, the peso’s exchange rate was fixed.

Since López Obrador was sworn in on December 1, the value of the peso has fluctuated in accordance with the gains and slides of the U.S. dollar on the international market as well as in response to measures announced or implemented by the new government.

After six weeks of the government’s six-year term, the peso was up 7% but it lost ground after Fitch Ratings downgraded the credit rating of the state oil company and Standard & Poor’s lowered its outlook for Mexico, Pemex and the Federal Electricity Commission (CFE) to negative from stable.

On Friday, the Bank of México (Banxico) said the interbank exchange rate for the peso closed at 19.48 to the U.S. dollar.

Although the peso has performed well since López Obrador became president, economic growth forecasts for the Mexican economy have been revised downward by a range of institutions in the same three-month period.

At the start of this month, the Organization for Economic Cooperation and Development cut its 2019 growth prediction by half a point to 2% while in late February, Banxico slashed its forecast to between 1.1% and 2.1%, a 0.6% reduction at both ends of the range.

The International Monetary Fund (IMF) and private financial institutions including the Bank of America and Goldman Sachs have also lowered their growth forecasts over the past two months.

Data published last month by the National Institute of Statistics and Geography (Inegi) showed that Mexico’s economy expanded by just 2% last year, the lowest GDP growth since 2013.

In the past two weeks, the Mexican Stock Exchange’s benchmark IPC index has taken a hit, seeing 7.34% of its value wiped off as a result of 10 consecutive days of losses.

Francisco Caudillo, an analyst at the brokerage house Monex, said the stock market has been mainly falling since the middle of January.

López Obrador has made combatting corruption and adopting austerity measures central to his government – initiatives that have largely been applauded.

But his decision to cancel the US $13-billion Mexico City airport generated investor uncertainty and financial institutions expressed skepticism that the US $5.5-billion rescue package for Pemex would be enough to remedy the company’s problems.

Nevertheless, Mexico’s most powerful business leaders made it clear at a February 18 meeting with López Obrador that they are willing to give him the benefit of the doubt, and that they remain committed to collaborating with the new government to achieve greater economic growth and prosperity.

Source: El Financiero (sp) 

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