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Monday, July 15, 2019
06:08 PM
Mexico Central Time
MARKETS AND DATA: US Dollar: $12.65 Euro: $16.78 Gold: US$1,327 Silver: US$20.39 Mex Crude: US$102.50 Cetes 28: 3.85%

posted 2009-06-16
Slight recovery on reserves
The Mexican Central Bank reported the accumulation of US$74,718 millions of international reserves on June 12. The descendent tendency experienced in the last 3 announcements has finished by a gain of US$233 millions compared to the figure reported last week.

posted 2009-05-29
Positive May for financial data.
The peso recovered 5% to the U.S. Dollar. The Mexican Crude Oil gained 22% scoring above the US$60 barrier. The Mexican Stock Exchange experienced an 11% rise. The gold and silver increased 6% and 19%.

posted 2009-05-07
Inflation rate tendency is around 6%
The inflation rate for April was 0.35%. This figure keeps the tendency of an annual inflation rate of 6%. The prices increase was focus on tomatoes, avocados, tortillas, beers, eggs and telephone line rates.

posted 2009-04-29
Inflation is going down
The Mexican Central Bank reported an annual 6.18% inflation rate for the first quarter of 2009. The inflation in Mexico in the last 4 months has started to drop from an annual 6.53% rate in December 2008 to an annual 6.04% rate in March 2009.

posted 2009-04-01
Suspicious growing up on external debt?
The International Monetary Fund (IMF) has granted a 47 billion dollars flexible credit line (FCL) to Mexico. The contingent resources available have been tagged by the Finance Ministry as a preventive source; which could be used to strengthen Mexico´s defenses against the financial crisis.

posted 2009-03-05
Fueling the Mexican Peso
The Mexican Central Bank announced the modification of the existent policy for intervention to the exchange market. The aim is to revisit the Peso to a more unbiased parity. Beyond of the auction´s system established since October last year, a new auction´s system will be implemented to offer 100 million Dollars to the market on a daily basis.

posted 2009-02-23
Mexican Peso on $15 per US Dollar
The Mexican Peso is suffering again from an odd economic scenario; after a week of turbulence, the exchange rate is moving to a “non-convenient” $15 per US Dollar.


Back to black… the Peso parity

April 05, 2009. 21:07

From the stable retail parity of about $10.50 Pesos per U.S. Dollar experienced just before Black October, the U.S. financial crisis quickly provoked a shift on the rate to $13, moving then to break the psychological barrier of $14 at the end of 2008, and eventually by the first week of March it peaked to a non-convenient retail exchange of $15.55 Pesos per U.S. Dollar; a 50% devaluation in less than six months. The loss of confidence was translated into the currency, along with the unsuccessful initiatives for market intervention made by the Mexican government financial institutions.

On March 5, 2009 the Mexican Central Bank remastered its policy for intervention to the exchange market. A new auction´s system was implemented to offer, on a daily basis, 100 million U.S. Dollars to the market independently to the daily exchange rate. On May 29, 2009 this amount was reduced to 50 million U.S. Dollars per day. The aim has been to gradually gain ground for the Peso and instill confidence to the economy. The rest of the interventions´ ruling by the use of daily auctions of several hundred million U.S. Dollars was maintained for exceptional occasions.

Revenge is a dish best served cold. It seems that the Mexican government financial institutions have started to solve the Peso parity puzzle, and the foreign exchange speculators have received their faith from the markets. The robust availability of U.S. Dollars ready for intervention has overshadowed the economic uncertainty. It is worth to analyze the recent Peso parity uptick, from the average retail exchange parity in April 2009 of $13.70 Pesos per U.S. Dollar, to the current parity within the band of $13.30 to $13.50 during June 2009. This means a devaluation of 28 percent; a less drastic depreciation than the 50 percent experienced in the previous months.

157 billion U.S. Dollars fund to safeguard the Peso
The Mexican International Reserves, rounding the 80 billion U.S. Dollars originally used as a backup for stepping into the marketplace by offering U.S. Dollars, received new allies. On March 24, 2009 the International Monetary Fund (IMF) granted a 47 billion U.S. Dollars flexible credit line (FCL) to Mexico. The contingent resources available were tagged by the Finance Ministry as a preventive source; which could be used to strengthen Mexico´s defenses against the financial crisis. Additionally, on April 3, 2009 the Mexican Central Bank announced its plan to activate 4 billion U.S. Dollars from the swap line with the U.S. Federal Reserve for the benefit of Mexican companies that were facing difficulties in obtaining U.S. Dollars funding. The auction scheduled on April 21st is intended to be channeled through the private banking, with an overnight index swap rate plus 50 base points, and a payment period of 264 days. These resources come from the offer made last year by the U.S. Federal Reserve as a temporary reciprocal currency arrangement (swap line) of $30 billion U.S. Dollars to the Mexican Central Bank. On June 25 the U.S. Federal Reserve announced that the swap line will remain available until February 1, 2010. These swap lines were also offered to the central banks of Australia, Brazil, Canada, Denmark, England, Korea, New Zealand, Norway, Singapore, Sweden, Switzerland and the EU Central Bank.

The Mexican Peso has started to win stability, and sooner or later is expected to conquer more positive tendencies. The question here is how much the higher prices on the U.S. Dollar parity during the first semester of 2009 will impact food and other goods inflation. The last decades phenomenon created by the Mexican economy significant dependency on imports of certain goods, which are no longer produced in Mexico, has increased the prices offered by the retailers and supermarkets. Most of the vendors have already adjusted their shelf prices to the high parity prices experienced in the previous months. The answer might come from two factors: first, the inventory levels of goods that some of the vendors have probably imported in the first quarter of 2009 when the U.S. Dollar was a little bit higher; and second, which will be the price response of the vendors to the current drop in consumption and the new tendency of consumers to expend their money more wisely.

DoingBusinessInMexico Staff
Published: April 05, 2009. 21:07 | Last updated: June 26, 2009. 11:31
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