20 mexican pesos bill Almost this many pesos to the dollar today.

Peso falls to 19.725, lowest since March

Inflation, US tax reform and corruption scandals that could benefit AMLO are blamed

The Mexican peso slumped to its lowest level in nine months today, falling 1% to 19.725 pesos to the U.S. dollar just before midday.

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News agency Reuters cited high inflation, the threat to investment posed by fiscal reform in the United States and corruption scandals in the ruling Institutional Revolutionary Party (PRI) — that could play into the hands of leading presidential contender Andrés Manuel López Obrador — as reasons for the drop.

The peso hasn’t been this low since March and this week is likely to be the worst for the currency since United States President Donald Trump took office in January. The peso has shed 6% of its value this month alone.

However, it is still stronger than just before Trump was sworn in when it traded at a historic low of 22 pesos to the dollar.

Renegotiation of the North American Free Trade Agreement (NAFTA) amid pressure from Trump to rework the treaty as well as threats to terminate the deal altogether have also placed downward pressure on the peso, with analysts predicting that the trend will continue in 2018.

Banco Base analyst Gabriela Siller highlighted the volatility of the currency based on the U.S. president’s rhetorical whim.

“With the level it’s at now, it’s likely that it will go to 20 pesos, especially if Trump speaks out about NAFTA again,” she said.

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Inflation rose slightly above analysts’ expectations in the first half of December to 6.69%, continuing pressure on the Bank of México to maintain high interest rates which currently stand at 7%.

United States tax reform, signed into law today, is also concerning because there are fears that Mexico may lose out on some investment opportunities to its northern neighbor.

The head of a United Nations economic commission said Wednesday that the reform will have an impact on the Mexican economy but some others have downplayed the potential damage it may cause.

Citibanamex analysts pointed to a new and still developing corruption scandal in the PRI as another factor for the weakness of the peso.

An adjunct secretary to the PRI presidency, Alejandro Gutiérrez, was arrested Wednesday, accused of diverting taxpayer money to a political campaign in the northern state of Chihuahua.

Gutiérrez has denied the allegations but analysts believe that it could provide a further boost to third-time presidential aspirant López Obrador, who has vowed to stamp out corruption and inequality while trying at the same time to shake off an image that he is anti-business.

A recent survey by polling company Parametria showed that he had an 11-point lead over his rivals. They include declared pre-candidates José Antonio Meade for the PRI and former National Action Party (PAN) president Ricardo Anaya, who is running under a coalition the PAN formed with the Democratic Revolution Party (PRD) and the Citizens’ Movement Party.

Source: Reuters (en), Milenio (sp)

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  • jdwfinger

    great news for ex-pats. going to the atm tomorrow to cash in. last week 7500 pesos was $394. yahoooo

    • BB

      Hope to join you soon.

    • Dallas Autery Y Rocio Heredia

      when i first got here it was 10 to 1 so i cant complain.

      • faithandhonor

        I was rummaging through some old foreign coins and found several silver pesos, when it was 8 to the dollar. Now much more valuable. Remember the devaluation of 1994.

        • Dallas Autery Y Rocio Heredia

          I have read about the Tequila Peso Crisis but i wasnt here then. It went to several thousand pesos to the dollar. i have a few older peso coins that vary in percentage of silver. i have a 1932 Silver Peso that is over 80% silver.

          • faithandhonor

            I worked for Pam Am for a while, and I have so many coins from defunct currencies, like the Brazilian cruzhiero, when they had 600% inflation. I should go look again. German marks, Turkish life, Italian life, French francs. Maybe they are worth something.

  • Mike S

    I’m on my way for a 6 month stay.

    • michael grosser

      sucker

  • Güerito

    This latest example of PRI corruption is explained in more detail here. It involves hundreds of millions of pesos in government funds diverted to PRI party campaigns in 2016.

    Mexico Graft Inquiry Deepens With Arrest of a Presidential Ally

    https://www.nytimes.com/2017/12/20/world/americas/mexico-corruption-pri.html

  • Richard V Simmons

    Mexico has a deep corruption problem at all the levels. Mexican are good peoples but the political and judicial systems is unfair for the poor.

  • fricotin

    Historic low ?? I remember when it was trading at 3 000 to one !

  • jdwfinger

    Yesterday at an ATM got 7,500 pesos for $384.

  • faithandhonor

    I think the the MX PTB thought that joining TPP would offset the losses of NAFTA. No such luck. And the currency markets know it.

    Let’s face it… MX can’t live forever on the industry and innovation from other nations, it can’t take the auto manufacturing, the Silicon Valley tech, and other benefits, and never come up with its own bottom-up economy. The governor of Jalisco is STILL trying to entice US tech businesses to move there, instead of growing his OWN tech industy with local people and local investment.

    The endemic corruption sucks the lifeblood out of this country. MX should have an oil refinery, a vibrant steel industy, and mine, smelt and fabricate its own copper. Why doesn’t it? CORRUPTION. Nobody can figure out how much moolah they can extract, so nothing gets done. So sad.

    Mexico has its own addiction to foreign business, and it has had ample opportunity to learn from others, and create its own. But it does not. Sad.

    • Mike S

      Asking Mx to do what almost no other poor country that was savaged and pillaged by European colonialism has ever been able to do is a tall order. China may be an exception but they never lost their culture and are far poorer than Mx. American drug demand has corrupted Mexico. Nevertheless, Mx ranks 90th out of 230 countries based on GDP per capita.according to the CIA:

      https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html

      You are right, they could do so much better. They do rank far ahead of the US on most “happiness index” surveys.

      • faithandhonor

        Singapore did it (thanks to the incredible Lee Kwan Yew), Malaysia did it, almost all the places that were colonized by Europe did it, unless in Africa. But the Spanish so brutalized the people wherever they went, that they left a huge scar on the psyche of the people. I saw this ALL over the world, and the corruption they bequeathed those nations exists today.

        Mexico has always been corrupt, and I have been going there for 50 years, and grew up in S. Texas. It is deeply rooted in the culture. Corruption destroys the economy in so many ways. It is my hope that technology will give the younger Mexicans a window into a better world, and not for just using their phones, but to make business.

        • Mike S

          Singapore is not a real country. It’s a tiny enclave of 5 million people that is a major tax heaven and banking center more along the lines of Hong Kong or Lichtenstein. I’ve never been to Malaysia, but I know it is probably the most secular and tolerant of Muslim countries; it too is very small compared to Mexico (30 million vs 130 million). It is also blessed with huge per capita oil & gas exports. I too have been going to Mx and lived there for short periods for over 50 years. The whole drug cartel thing breaks my heart. I too share your hope for the younger generation; the drug war can’t last forever. The British Empire was brutal too. The difference was that they only brought a single edged sword to rape and pillage their poorer colonies where as Spain brought a double edged sword-religion and endless indentured servitude. Britain set back India and China a hundred years. Spain committed physical, cultural, and religious genocide all over Latin America.

          • faithandhonor

            I was in Singapore in 1971, when there 2 Western hotels, and the customs area was in WWII quonset huts painted white, with British library tables for baggage inspection. Long way since then.

            I suggest you read the memoirs of Lee Kwan Yew, a most remarkable man who brought the NATION of Singapore into being and growth through multitudes of trials and threats, mostly from Malaysia and the Muslim majority. A fascinating man and story.

            He allowed no ethnic enclaves, saying that all were Singaporeans, applied free market principles and a strict rule of law, and look at it now. Prosperous, civilized, without racial or ethnic strife. The envy of the area. Remarkable place, remarkable man. An example for all.

          • Mike S

            Singapore is a city state of 5 million. It is a major banking center of Asia and that’s where it gets its wealth. Billionaires looking for tax havens park their money there. Financial institutions, tourism, casinos, and oil refining make it a First-world city-state. Its mostly Buddhist population keeps its brain-dead Muslim population under control. It is almost a police state which keeps crime low and visitors “safe”. A great place to visit if you can afford $500 hotel rooms and great dinning. Culturally it is a void. La Jolla California is a great place too. These are not realistic models for the rest of the world. Mussolini made the trains run on time and tried to Make Rome Great Again…it didn’t work.

          • faithandhonor

            Sigh….As I said, read the history before you offer a Wikipedia-derived opinion of Singapore. You will understand how this small place rose to the place it has, and the trials to get there. Your explanation is simplistic and uninformed by history, or an understanding of the struggles to bring a civilized nation to birth under the most adverse of circumstances, including having all the water to the city cut off by the Malaysian Muslims.

            Americans were blessed to have a “tabula rasa” in our founding, we did not emerge from feudalism (as did MX), and by any measure, America is a better culture (although degrading in recent years under Obama), with more opportunities, more freedom and prosperity.

            The point being that Singapore, and America, rose from struggles against forms of totalitarianism to create socities with relatively widespread prosperity, and stable currencies. CAPITAL WILL MIGRATE TO PLACES WHERE IT WELCOME AND SAFE, and not viewed as just another milk cow for the government and the PTB.

            Therefore, rather than risk the assets and reserves of the MX central bank in the dervatives market to stabilize the peso, systemic change toward freer and less corrupt systems will stabilize the currency with less risk. There ARE examples out there, if the PTB will see it.

          • Mike S

            Singapore is a nice place for what it is- a small city-state banking center tightly controlled where people can get 20 lashes for sticking a piece of chewing gum under a restaurant table. It is not a realistic model for Mexico no matter how much you want to fantasize about that. The US was blessed with abundant natural resources, no threats from north or south, two large oceans, France and Germany at war during our revolution, and the wisdom to embrace the new ideas of the European Enlightenment into a Constitution what has been improved & amended 26 times. Obama rates in our top 10 best presidents; our bottom three in order: Jackson, Bush, Trump. But Agent Orange likes winning so I expect him to move into first place eventually. Capital moves to places where it is welcome and safe- places like Panama, Cayman Islands, Bermuda, Isle on Man, Cyprus….

          • faithandhonor

            Ok, I give up. Trump Derangement Syndrome. Almost incurable.

          • Mike S

            Yes TDS is a real epidemic- almost 66% of the American population has it. Those who are immune to it seems to have high levels of gullibility and lack critical thinking skills.

          • Mike S

            Maybe you should read more Wikipedia:

            https://en.wikipedia.org/wiki/Human_rights_in_Singapore

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