Foreign Investors’ Love Affair With Mexico Ignores Populist’s Rise

04/23/2018 Bloomberg

The Bank of Mexico logo is seen on the facade of an office building in downtown Mexico City
The Bank of Mexico logo is seen on the facade of an office building in downtown Mexico City, Mexico, June 22, 2017. REUTERS/Edgard Garrido

Talk to most foreign investors about Mexico these days and you’ll likely to hear the same mantra: focus on Nafta now and worry about the upcoming presidential election later.

After all, the election isn’t until July and there’s growing optimism that Mexico will soon wrap up a revised trade deal with the U.S. and come away relatively unscathed. This month, hedge funds upped their bullish peso bets to the highest since September while overseas buyers are boosting investments in equities.

To BlackRock’s Jack Deino, it’s only part of the story.
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Mexican Peso Gets Crushed as Lopez Obrador’s Election Lead Looks Untouchable

04/23/2018 Bloomberg

pesoMexico’s peso is all of a sudden the worst performing major currency as investors begin to accept that the next president is likely to be the populist firebrand they feared.

It’s a stark reversal that took hold over the past week, coming after the peso posted the biggest global gains in the first quarter amid optimism the country would reach a favorable outcome in trade talks with the U.S. and Canada. Now, traders are refocusing on the political outlook before the July 1 election, and see Andres Manuel Lopez Obrador coasting to victory.

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Dollar Slips Against Mexican, Canadian Currencies

04/16/2018 The Wall Street Journal

120px-20_Dollars_art3The Canadian dollar and Mexican peso rose against the dollar Monday, reflecting fresh optimism on trade negotiations with the U.S.

The dollar was recently down 0.1% against the Mexican peso to 18.03, its lowest level since late September. The U.S. currency was down 0.2% against the Canadian dollar to C$1.2577, hovering near a two-month low.

Some investors have become more optimistic that negotiators are closer to reaching a deal to revise the North American Free Trade Agreement, or Nafta, after reports that the Trump administration is hammering out a compromise on auto-industry rules.

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Mexican Peso, Loonie Rally on Auto Olive Branch in Nafta Talks

03/21/2018 Bloomberg

Pesos by Flickr user AleiexThe Mexican peso and Canadian dollar rallied Wednesday after the U.S. reportedly compromised on one of the most contentious issues in North American Free Trade Agreement negotiations.

The Trump administration dropped a demand that all vehicles made in Canada and Mexico for export to the U.S. contain at least 50 percent U.S. content, the Globe and Mail reported, citing people with knowledge of the talks. The peso led gains among the world’s major currencies, while the loonie was the leader among G-10 currencies against the dollar.

Word that the U.S. is backing away from one of the key Nafta sticking points may be the clearest sign yet that the U.S. is easing its initial hard-line stance. That bodes well for the talks, said Credit Agricole foreign-exchange strategist Vassili Serebriakov.

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EMERGING MARKETS-Mexico peso firms on rate hike bets, weaker U.S. dollar

02/22/2018 Reuters

peso by Guanatos GwynLatin American currencies gained on Thursday as the U.S. dollar’s rally from a three-year low last week ran out of steam, with the Mexican peso strengthening more than 1 percent on strong bets Mexico’s central bank could again hike interest rates.

Minutes of the latest monetary policy meeting showed
Mexico’s central bank board members are concerned about
persistent inflation pressures and risks that the local currency
could be hammered, adding to consumer price pressures.

Mexico’s peso strengthened 1.15 percent on Thursday
even as consumer prices in Latin America’s second largest
economy rose less than expected in early February.
“The probability that Banco de Mexico keeps hiking the key
interest rate is still high,” said Gabriela Siller, head of
economic analysis at Banco BASE.

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EVENT ON MONDAY | The State of Mexico’s Economy

mexican pesosWHEN: Monday, January 9, 1:30-3:00pm

WHERE: 6th Floor Board Room, Wilson Center, Washington, DC

Click to RSVP

The Wilson Center’s Mexico Institute is pleased to invite you to an event with the International Monetary Fund’s Mexico team, who will present the conclusions of the recently-completed 2016 Article IV consultation with Mexico.

Mexico’s economy has been growing at a moderate pace, inflation is low, and the unemployment rate has been declining. Fiscal consolidation has begun and the financial system remains strong and resilient to severe shocks. It would be critical to adhere to the planned fiscal consolidation to put the public debt ratio on a downward path, and take steps to strengthen the commitment framework for fiscal policy. Steadfast implementation of the plan to reform PEMEX and strengthen its financial viability is also important. Future monetary policy decisions should continue to be guided by the objective of keeping inflation expectations anchored, while clear communication by the central bank is critical. The exchange rate should continue to act as the key shock absorber to help the economy adjust to external shocks. Significant progress has been achieved in strengthening financial sector prudential oversight but some gaps remain, especially in the governance framework of CNBV and IPAB. On the structural front, strengthening the rule of law and boosting female labor supply would boost potential output and reduce inequality and poverty. Going forward, Mexico will need to navigate an uncertain and complex external environment, with elevated risks of protectionism and heightened global financial market volatility.

Speakers

Robert Rennhack
Deputy Director, Western Hemisphere Department, IMF

Costas Christou
Advisor, Western Hemisphere Department, IMF

Alex Klemm
Senior Economist, Western Hemisphere Department, IMF

Damien Puy
Economist,Western Hemisphere Department, IMF

Fabian Valencia
Senior Economist, Western Hemisphere Department, IMF

Commentator

Christopher Wilson
Deputy Director, Mexico Institute, Wilson Center

Moderator

Duncan Wood
Director, Mexico Institute, Wilson Center

Click to RSVP

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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