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Mexican Economy Continues Decline; Peso Briefly Falls Below 16

The Mexican peso continues it fall, breaking 16 to 1 US dollar this week.

A stable Mexico remains essential for the United States and Texas. Over the past year the Mexican peso has been weakening. A year ago it was 12.97 to the US dollar; 6 months ago 14.66; one month ago 15.34; and on July 2o 16.02. By July 22, the peso exchange rate rose to 16.09.

Dr. Tony Payan, director of the Mexican Center at the Baker Institute, notes currencies rise and fall on supply and demand. He says a weak peso benefits US tourists with a strong dollar, benefits Mexican exporters, and hurts US exporters of goods purchased by Mexicans.

Daniel Zavala notes the following are reasons for the peso fall: global rise of the US dollar; the Banco de Mexico has not raised interest rates as it remains unsatisfied with the current level of inflation; Mexico’s growth rate is too low because the government has not spent on infrastructure programs; and the declining price of oil is very unfavorable.

On July 1, 2015 analysts at Societe Generale projected the peso can go lower and have revised their target to 17 pesos to the dollar.

Politically, the rumors regarding President Pena Nieto’s health continue.

The drop in oil prices has substantially reduced the value of PEMEX oil exports. The following are the export oil values and production: see www.pemex.com/en/englis/investor. A further drop in the $51 bb oil price will put more pressure on the peso.

Value of Mexican oil exports in million US dollars

April 2013      $3,792       May 2013   $3,149

April 2014      $3,017       May 2014  $3,349

April 2015      $1,558       May 2015  $1,909

Volume of oil exports

April 2013       1,275        May 2013  1,029

April 2014       1,051        May 2014  1,116

April 2015       1,030        May  2015  1,114

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