How Does Volatility Against the Dollar Affect the Mexican Economy?

Is it a risk for the Mexican economy that the super peso has lost ground against the dollar? This is the question that has arisen since the exchange rate reached 20 pesos per dollar, raising concerns about the weakening of the super peso that had surprised us since the beginning of the year. However, it is important to clarify that this volatility of the national currency was expected given the economic outlook of the United States.

To understand the implications of this, El Heraldo de México, interviewed Professor Héctor Magaña, an accounting and finance professor at the Business School of Tec de Monterrey, who clarified that this volatility does not represent a risk for the Mexican economy, so there is no need to be alarmed.

Firstly, Magaña explained that this change in the strength of the peso against the dollar started on Friday and is due to the unemployment rate in the United States falling below market expectations, causing investors to indicate that there could be a recession in the coming months.

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This volatility could continue in the coming months, causing the peso to hover around 19 or 20 pesos per dollar in exchange rate, explained Professor Héctor Magaña.

How Does Peso Volatility Affect the Mexican Economy?

The Tec de Monterrey professor explained that the Mexican economy will be affected because if there is a recession in the United States, there will be less export of Mexican products to that country, such as cars and oil, as we are the main trade partners in this regard with the northern country.

The most evident impact would be on the exchange rate. People who receive dollars will benefit, but all imports we make from the United States and other countries that are referenced in dollars will increase in price, which could lead to an increase in inflation.

The finance professor explained that this will cause impacts on economic sectors such as:

• High credit
• Increased interest rates

How Will the Peso Close in 2024?

Héctor Magaña indicated that it is currently difficult to predict how significant the peso's depreciation against the dollar will be, as there is a lot of volatility, but what is real is that the super peso will be depreciated and volatility will remain for the rest of the year. "Next year, there will be a more stable outlook for the peso against the dollar," the expert noted.