Brexit Burns Mexico as Peso Plunge Spurs Wagers on Rate Increase

26/06/16 Bloomberg

peso by Guanatos GwynThe U.K.’s vote to leave the European Union is reverberating loudly in Mexico.

The peso tumbled the most since 2011 on Friday, hitting a record low in the wake of the results of the Brexit referendum. After weakening further Monday, it’s now down 9.7 percent this year, the biggest plunge among the world’s major currencies.

The U.K. vote and the peso drop prompted BNP Paribas SA to bring forward its forecast for an interest-rate increase in Mexico by six months to this week, and swaps traders to boost bets for higher borrowing costs by the most in a month. With the currency’s deepening slide threatening to fan inflation in Latin America’s second-biggest economy, central-bank officials led by Governor Agustin Carstens will probably lift the 3.75 percent benchmark as a “preventive move” when they meet Thursday, said Credit Suisse Group AG’s Alonso Cervera.

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Hedge for Anything Spurs Mexico Peso Shorts Before Brexit Vote

06/21/16 Bloomberg

peso by Guanatos GwynTraders have found yet another use for shorting the Mexican peso — as a hedge for the risk of a Brexit.

With the ballot on the U.K.’s membership in the European Union just a day away, the peso is the most in sync with the pound in almost a year. It tumbled when sterling fell in May as odds showed a higher chance Britons would vote to leave, before rallying alongside it for two of the past four days as polls showed the “Remain” campaign gaining steam.

The rising correlation means traders can short the peso to hedge against the global fallout from Brexit that everyone from Federal Reserve Chair Janet Yellen to the International Monetary Fund’s Christine Lagarde predict would be the consequence of a U.K. “Leave” vote Thursday. With $135 billion in daily trading, the peso is a proxy for risk, with investors using it to guard against events such as a Donald Trump presidency and a hard landing for China’s economy. Net shorts climbed for six consecutive weeks through June 14, the most recent Commodity Futures and Trading Commission data show.

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Leaders of Latin America’s 4-nation Pacific Alliance trade bloc meet to discuss final form

Latin_America2Associated Press, 5/22/2013

The presidents of Colombia, Peru, Chile and Mexico meet in the western city of Cali on Thursday in hopes of completing a nascent trade bloc that looks to the European Union as a model and aims to further open their trade with Asia. The leaders of Canada, Costa Rica, Guatemala and Spain, all interested in eventually joining the bloc, are due to attend as observers. Costa Rica was signing a free trade agreement with Colombia on Wednesday.

The Pacific Alliance was formally inaugurated last June. All its members but Colombia already belong to the Trans-Pacific Partnership, an Asia-Pacific-wide trading bloc that includes Canada and the United States. In a televised speech Tuesday night, Colombian President Juan Manuel Santos, an economist and former foreign trade minister, called the alliance essential to “the most important process of integration in the history of Latin America.”

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Mexico Envisions Nafta-EU Trade Agreement, Foreign Minister Says

NAFTA_logoBloomberg, 3/23/2013

Mexico envisions a trade deal tying it to the European Union, U.S. and Canada as the future of transatlantic commerce and would welcome joining talks between the U.S. and EU, Foreign Minister Jose Antonio Meade said. An agreement that binds the nations of the North American Free Trade Agreement to the EU, the world’s two largest free- trade areas, makes the most sense because it would leverage the economic power of the Nafta nations, Meade said. Mexico already has a free-trade deal with the EU, while Canada and the U.S. are each negotiating their own trade deal.

Having each nation in a separate bilateral agreement with the EU wouldn’t “take full advantage of the economies of scale and scope that have resulted from Nafta,” Meade said in an interview yesterday in Washington. “We would be very willing to participate from the outset if from the outset it would be made to be something regional rather than bilateral.”

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EU trade chief calls on Mexico to reopen trade pact with Europe

Reuters, 11/13/2012

Europe and Mexico need to go back to the negotiating table to rework their 12-year-old free-trade agreement to include services and agriculture, the European Union’s top trade official said on Monday.

EU Trade Commissioner Karel De Gucht said Mexico and Europe needed to rework their trade pact, which was signed in 2000, to match the framework of more recent and comprehensive deals.

“Mexico and the European Union have been pioneers of transatlantic free trade but our legal relationship now risks falling behind,” De Gucht told a conference in the central Mexican city of Queretaro.

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