The Devaluation of the Mexican Peso

The Devaluation of the Mexican Peso

In the year 2016, the Mexican peso has reached its highest exchange rate against the U.S. dollar this September, peaking at 20.06 pesos per dollar.

As economists try to explain the steady rise in price from around sixteen pesos at September of 2015,  some justify the economic deceleration because of external influences, including Donald Trump’s campaign. The Mexican government has attributed the rise to the strengthening of the U.S. dollar and recommends that Mexican citizens pay their debts. The government has also recommended against buying dollars with the intention of reselling them later.

This sudden rise in the price of a dollar is not unusual for Mexicans. In the past decades, the country has suffered from high inflation rates. The Institutional Revolutionary Party, or PRI in Spanish, governed Mexico from 1929 to 2000, vastly industrializing and shaping the country. After a series of reforms and positive external contingencies, a period known as the Mexican Miracle marked the Mexican economy’s growth from 1940 to 1970 of about 6% a year. However, in 1982, the economy, highly dependent on oil, began slowing down, ultimately collapsing after the 1982 oil crisis. During the 1980’s and 90’s, the Mexican Peso went through hyperinflation periods eventually stabilizing after PRI lost power to an opposition party.

When the PRI returned to power in 2012 under Enrique Peña Nieto, the current president, the dollar was priced at around thirteen pesos. Unfortunately, after the price of oil halved in 2014, there has been a steady rise in the dollar value per peso since 2014, renewing the economic slowdown Mexicans are familiar with. The Mexican Government attempted fiscal and energetic reforms by increasing spending and public debt, but such reforms have not helped as much as the government expected. The economic slowdown has worsened as the projected growth in 2015 was cut from 3.0% to 2.4%, and in 2016 from 3.6% to 3.2%. Some have alluded to international events, such as Donald Trump’s success in the polls for the US presidential elections and the United Kingdom leaving the European Union, as having weakened the already beaten up Mexican currency.

As public debt reached an alarming 45% of GDP by the end of 2016, Mexicans fear the return of economic hardships, and hope Mr. Peña Nieto can ameliorate the crisis.



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