My first experience with the Mexican peso came just weeks before I arrived in Mexico in January of 1996 for a semester of studying abroad in Guadalajara. In a period of just a few weeks, the peso devalued against the dollar from 3 to 6. Said differently, things almost overnight cost half as much for those of us fortunate to have US dollars. Even for me, a poor college student, things seemed impossibly cheap. My city bus fare to the university was about 3 cents. A subway fare, about 7 cents. Even McDonalds had a simple cheeseburger extra value meal called the “Golazo” which cost 2.99 pesos (50 cents!). As you might imagine, it became my go-to meal.

I learned a lot about currencies that semester in Mexico, and have followed the exchange rate of the peso versus the dollar closely ever since. Predicting short-term movements of currencies is said to be a fool’s game, but over the past 25 years, from that crash in late 1995 until the COVID pandemic in early 2020, the peso’s movement against the USD was pretty predictable. In over two decades, the average depreciation of the peso was about 10% per year. Some years it was more, sometimes it was less, but that was the average. This meant that it was a pretty safe bet that, if you had USD, Mexico was likely going to get less expensive as the year progressed.

It was also a relatively safe bet to assume that inflation and interest rates would be higher in Mexico, while GDP growth would be lower. This made for a fairly safe assumption that the peso would depreciate each year. And depreciate it did. As we all know, over that 25-year time period, the peso further weakened from 6 to over 20 pesos to the USD. When the pandemic hit, currencies behaved as expected. There was a “flight to safety,” with the USD appreciating as a result and emerging market currencies, including the Mexican peso, depreciating. The peso quickly fell to 25. But then, everything changed. The peso began a multi-year strengthening against the USD, defying just about every “expert,” and since then has been unpredictable.

These past five years have witnessed countless “Confidently Wrong” predictions about the peso. And as a result, this week’s podcast is a deep dive into the peso, what has happened, why have so many people been wrong, and where it might go from here. Check it out!

Travis Bembenek is the CEO of Mexico News Daily and has been living, working or playing in Mexico for nearly 30 years.