A Victim of Trump (and Fundamentals), the Peso Falls

11/14/2016 Forbes.com, Mexico Institute Blog

By Viridiana Rios, Global Fellow, Mexico Institute

pesoI write today as a middle class Mexican whose savings lost 10 percent of their value when American voters elected a leader who pledged to renegotiate NAFTA and tax us to pay for a wall. As a result of the election and other factors, the Mexican peso has overtaken the Argentine peso and the South African Rand to become the emerging markets 2016 worst performer.

The Mexican Peso was a barometer for the presidential campaign. It lost 10 percent of its value when Clinton lost, 1.9 percent in the week after the FBI reignited Clinton’s email controversy, and hit its historical low in the days following the election as speculation turned to the potential impact of Trump’s first months in office. The peso spiked 1.3 percent in less than an hour during the first presidential debate, and when Trump’s lewd conversation about women broke, it gained 2.2 percent.

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Mexico GDP Beats Forecasts on Consumer Spending; Peso Rises

4/29/16 Bloomberg Business

pesoMexico’s economy expanded more than analysts forecast for the third time in four quarters as strength in domestic consumption offset weak exports and a drop in oil output. The peso extended its gain, rallying to the strongest level in more than four months.

Gross domestic product rose 2.7 percent in the first quarter from a year earlier, according to preliminary figures released by the national statistics institute Friday. That compared with the 2.4 percent median forecast of 19 economists surveyed by Bloomberg. From the previous quarter, GDP expanded 0.8 percent. The institute will release final GDP figures May 20.

Mexican consumers are spending more as inflation holds near a record low and remittances rise amid weakness in the peso. The country has been a bright spot for growth compared with some Latin American economies such as Brazil, and in an interview last week, central bank Governor Agustin Carstens said it may get even better as factors that have held back the expansion, such as weak exports, begin supporting growth.

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OHL Mexico Fined Over Accounting Practices

3/29/16 The Wall Street Journal 

MEXICO CITY—Mexico’s financial watchdog slapped close to $3.5 million in fines on toll-road operator OHL Mexico SAB and two of its units over accounting practices that boosted its income and asset valuations.

OHL Mexico, a unit of Spain’s Obrascón Huarte Lain SA, said in a news release Monday that Mexico’s Banking and Securities Commission also ordered it to submit a restatement proposal as part of its probe into the company’s alleged accounting irregularities.

The investigation focused on OHL’s claim that its contract with the State of Mexico for a major toll road it operates outside Mexico City allows the company to earn a guaranteed 10% annual profit above inflation via toll increases and other measures.

OHL has said the state is liable for the guaranteed profit even if OHL doesn’t recover those funds during the life of the contract, an interpretation that Mexico’s financial watchdog disputes.

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Mexico inflation in first half of March at 2.71 pct

3/22/16 Reuters

Mexico’s annual consumer price inflation rate in the first half of March stood at 2.71 percent, data from the country’s statistics agency INEGI showed on Tuesday.

Consumer prices rose by 0.1 percent in the first half of March.

The index of core consumer prices rose by 2.86 percent compared with the same month a year earlier, and by 0.3 percent in the first two weeks of March, the data showed. (Reporting by David Alire Garcia)

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Mexico central bank seen holding steady after peso rally

3/18/16 Reuters

Mexican pesoMexico’s central bank is expected to hold borrowing costs steady on Friday after a rally in the peso dampened concerns that currency weakness will fan inflation higher.

All 15 analysts surveyed this week by Reuters said they expect the central bank to hold its key lending rate at 3.75 percent following a surprise hike in February that was aimed at supporting the battered peso.

The Mexican currency has rallied about 9 percent since the central bank delivered its half-percentage-point hike on Feb. 17 and intervened directly in the foreign exchange market for the first time since the 2009 financial crisis.

A global rally in riskier assets has helped lift the peso against the U.S. dollar. A statement from the U.S. Federal Reserve on Wednesday suggested it will likely take longer to raise rates than some had recently thought.

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Mexico Central Bank Cuts Growth Forecast as U.S. Industry Stalls

3/3/16 Bloomberg 

Mexico’s central bank cut its 2016 growth forecast for the third time, saying slower U.S. industrial activity will hurt demand for the nation’s goods.

Gross domestic product will increase 2 percent to 3 percent this year, compared with the previous estimate of 2.5 percent to 3.5 percent, the bank said in its quarterly inflation report published Thursday on its website. Inflation will quicken to slightly above the 3 percent target in the second and third quarters before ending 2016 near 3 percent, policy makers said.

The central bank, led by Governor Agustin Carstens, surprised investors on Feb. 17 by raising the nation’s key interest rate half a point to 3.75 percent and introducing discretionary dollar sales in an effort to head off a rise in inflation expectations stemming from a weak peso. Since the measures were announced, the peso has appreciated the most among major currencies from a record low as economists expect the benchmark rate to rise even further this year.

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Mexico Central Bank Narrows Growth Forecast, Sees Tame Inflation

11/4/2015 Bloomberg

mexican pesosMexico’s central bank narrowed its 2015 growth forecast, saying improvement is being limited by stalled exports and weak industrial output, and that inflation will remain near policy makers’ target for two years.

Gross domestic product will increase 1.9 percent to 2.4 percent this year, compared with the previous forecast of 1.7 percent to 2.5 percent, the central bank said in its quarterly inflation report published Wednesdayon its website. Growth will then probably accelerate over the next two years, policy makers said.

While most economists surveyed by Bloomberg expect Mexico to raise interest rates in December following an expected increase by the Federal Reserve, Governor Agustin Carstens said a U.S. move doesn’t necessarily require Mexico to follow suit, given current economic conditions. The peso’s tumble to a record low has shown few signs of spurring inflation, though Carstens emphasized that the bank is watching for signs of pass-through to consumer prices.

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