Mexican Currency Devaluation of 2009
In February 2009, the exchange rate reached 15 pesos per dollar, an unprecedented loss in the value of Mexican currency. Financial analysts agree that this price adjustment is a consequence of the weakened currencies in emerging countries, upon the fear of a deeper financial crisis in the United States; although they also infer this peso devaluation during 2009 is produced by the monetary operations motivated by speculations.
To face this economical crisis, the Mexican government has hired a foreign debt with international financial organisms for 3,000 million dollars from the World Bank and 5,000 million dollars from the Inter-American Development Bank with the purpose of developing housing, infrastructure and poverty prevention programs. In the less than two months of 2009, the Bank of Mexico has sold 2 thousand 740 million dollars to financial intermediaries in order to maintain cash availability and prevent a further devaluation.
This devaluation has deepened the depreciation of national currency by prompting dollar purchases, which the Mexican government has faced by establishing a sales limit at 400 million pesos per day and auctioning part of its reserves.
Unfortunately, since Mexicos economy depends on imports, this devaluation will have an inflationary effect while raising the price of imported goods by 40% compared to the prior year.
This weakening of the Mexican currency, combined with its proximity to the US, will prompt the tourism industry. Cancun is one of the most favored destinations by North American visitors. It expects to receive 30,000 visitors during these Easter vacations, prompted by the lower costs in the dollar-peso exchange. Mexico is taking advantage of this opportunity by launching intense tourism promotion campaigns.
The current world financial crisis will further affect the already difficult economic situation in Mexico by reducing the value of Mexican oil by 60% during 2009, compared to its highest price reached in July of 2008. Forecasts indicate that the resources obtained from oil will suffer a further 28% reduction during 2009. This situation gravely affects the exports and manufacturing industries.
This crisis could worsen during the year because 80% of Mexicos exports are destined to the US, where recession has affected the demand for this merchandise; immigrants have lost their jobs and consequentially, Mexico has perceived less remissions; as well as diminished foreign investments.
Article Produced by Explorando Mexico Editorial Team.
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