"Super Peso" effect - Article

by Padrino ⌂ @, Rosarito/Zihuatanejo, Saturday, April 13, 2024, 11:44 (939 days ago) @ jaui

"We are seeing a very strong growth in the trade deficit of Mexico and the United States. We are importing much more than we are exporting, we are seeing that tourists are having difficulties visiting our country."


Currency fluctuations and their ramifications are subtle and complex. A weaker currency does make it harder for tourists but it makes it easier for those businesses wanting to sell to the country whose currency has appreciated.


"A weaker currency does make it harder for tourists but it makes it easier for those businesses wanting to sell to the country whose currency has appreciated."

Yes and no, maybe or maybe not.
Basic answer: The gain in the value of the country's currency that has appreciated, probably was wiped out by inflation. It's a "wash".

Inflation has been an issue worldwide thanks to that stupid microbe Covid. The locals would only benefit from a stronger peso if they were buying goods and service from the United States. Thus, their peso would go farther if they were to vacation in the States or buying something directly imported from the U.S. Goods and services emanating from Mexico would not be affected. This is why their answer to your question was a resounding, "No!"

As the original article stated, Mexico is importing more goods and services as a result of the stronger peso. Mu guess is this is because of the growing Mexican economy and the ongoing foreign investments in Mexico, often call "nearshoring." Covid was a wake-up call for the multinational companies who had always looked to the lowest cost producer, no matter where they were domiciled. They counted on the ability to move goods around the world with ease. The virus showed them who was actually in charge.


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