I have written about the peso many times before. Other than safety, I would argue that there is no other issue that affects everyone like that of the peso. Business people making investment decisions — concerned about the peso. Low income families in Mexico depending on wire transfers in USD from family members in the U.S. — watching the peso. Expats living in Mexico and vacationers to Mexico making budgeting/planning decisions — worried about the peso. And Mexican families looking to vacation abroad or buy foreign goods — you guessed it, closely monitoring the peso.
As 2025 came to a close with the peso touching below 18, we learned that the peso appreciated more in the year against the USD than it ever has in modern history (since 1994 to be exact). Think about that for a minute. Literally no one was expecting the peso to appreciate last year — the average prediction of the “expert analysts” was a depreciation to 21 — and instead it got stronger! At the risk of getting a little wonky, think of all of the events of last year that, in theory, should have caused the peso to weaken in 2025:
1. President Trump’s constant threats against Mexico for everything from drugs, water, immigration, trade and more.
2. President Trump’s “America First” policies, threatening the value proposition of Mexican manufacturing.
3. President Trump’s tariffs against Mexico and in particular the critical automotive, steel and aluminum industries.
4. Record amounts of new investment announcements in the U.S. that, if anything, should have made the USD stronger versus emerging market economies like Mexico.
5. The (I would argue incorrect) rhetoric from the opposition that the newly elected President Sheinbaum was anti-business and had socialist policies that would turn the country into the next Venezuela.
6. Mexico’s 2025 economic growth was terrible, with GDP growing less than 1% for the year versus nearly 3% for the United States and 3% globally.
7. Mexico lowered its interest rates much faster than the U.S., making the peso less attractive compared to other countries that lowered interest rates more slowly. (It is often the rate of change that is more impactful on a currency versus the absolute rate.)
8. Mexico’s inflation rate is higher than that of the U.S.
9. Even the thought of the USMCA trade agreement not being renewed is potentially catastrophic for Mexico.
Any one of these events could have caused the peso to weaken in a typical year, and the peso historically has devalued for less impactful reasons. In fact, the peso has on average devalued against the USD around 10% annually over the past 30 years!
Pros and cons of the ‘superpeso’: A perspective from our CEO
So what is going on here? And what should we expect for 2026? Let’s start with what standard economic theory (which arguably was very wrong in 2025) would tell us about what should happen to the peso in 2026:
1. Mexico’s economy will grow slower than the US economy — downside risk for the peso.
2. Significant USMCA renewal risk (economic tensions) throughout the year — downside risk for the peso.
3. Expansion of the war on drugs to include Mexico (geopolitical tensions) — downside risk for the peso.
4. Mexico’s inflation rate remains higher than the U.S. rate — downside risk for the peso.
5. Mexico’s interest rate continues to be lowered due to slowing economy — downside risk for the peso.
In fact, I don’t see any factors in the short term that (using standard economic theory) would point to a strengthening of the peso in 2026. But of course there is often an important element to exchange rates that don’t follow standard theory.
So what could be the logic around a continued strengthening of the peso (or even maintaining the current rate) this year? Here are a few:
1. Markets and companies globally increasingly recognize that Mexico is critically important to the U.S. as China tensions increase.
2. Faith that the USMCA agreement will be renewed and potentially even strengthen economic ties between the U.S., Mexico and Canada.
3. The belief that the U.S. war on drugs could actually benefit Mexico, making it more attractive to investment.
4. Increasing confidence in President Sheinbaum’s policies being pro-growth and business-friendly.
5. The belief that Mexico might begin to open up its energy industry to foreign investment.
Mexico in the past has relied on the constant devaluing of the peso to keep the country competitive and attractive for foreign investment. Those devaluations reliably provided a short-term boost to the economy, but kept the country from making the kinds of investments resulting in long-term growth. 2026 is going to be a key year for Mexico to demonstrate if it is worthy of its strong currency, or if it will fall into the trap of a peso devaluation to juice the economy. Stay tuned … MND will be your front row seat for every tick of the peso. It is going to be fascinating to watch.
Travis Bembenek is the CEO of Mexico News Daily and has been living, working or playing in Mexico for nearly 30 years.
