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The Future of Mexico’s Economy

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Robert Nelson Co-Founder of Expats In Mexico
Robert Nelson

The peso-to-dollar exchange rate is hovering around 19 pesos as I write this column, a bonanza for expats who are benefiting from the peso’s plunge. But, according to the Wall Street Journal, Bloomberg News and many other financial news media, the party may end on November 9th.

The peso’s roller coaster ride has mapped the ups and downs of the U.S. presidential race, heading down when Donald Trump advances and strengthening when Hillary Clinton gains the upper hand.

One of the most contentious presidential races in modern history is having a profound effect on Mexico, as the country’s government is eyeing the damage a Trump presidency could bring to the nation’s economy.

Mexico is the third largest trading partner of the United States and represents the second largest export market for U.S. products and services. Since the implementation of the North American Free Trade Agreement (NAFTA) in 1994, Mexico’s share of U.S. imports has increased from 7 percent to 12 percent and its share of Canadian imports has doubled to 5 percent.

With the 15th largest gross domestic product (GDP) in the world, Mexico sends the U.S. nearly three-fourths of its exports, so any political change north of the border would have major ramifications for the economy in Mexico.

According to the Wall Street Journal, the Mexican peso has ended its longest losing streak since February, chiefly because stock traders believe Mexico’s central bank will shore up any losses resulting from worry over who will win the U.S. presidential election.

The country has a lot to lose economically if Donald Trump becomes the next president of the United States. First, he has proposed seizing remittances, which are a very important part of Mexico’s economy. Second, he has advocated leaving the North America Free Trade Agreement, which has increased Mexico’s exports sevenfold. The dissolution of NAFTA would have an inestimable effect on Mexico’s economy.

And, of course, his deportation and wall-building plans also will reverberate throughout Mexico’s economy.

There is nothing better than having an advantageous exchange rate, particularly if you are an expat living on a fixed income. But it doesn’t mean that much if the local economy is crumbling all around you.

We will know in less than four weeks.

4 COMMENTS

  1. It is very clear that Mr Trump and his legion of haters and intolerant people will go down to a crushing defeat. The word “groping”comes to mind. The women in the US electorate have the power now and they don’t like The Donald. Trump ONLY has a lead with one demographic and that is white (mostly old) males. The day of the old white male is OVER. Don’t believe we, watch.
    The FED will soon raise rates and that will drive the US dollar to new highs. Mexico does have a bright future and those of us who live here and travel can see it in the plague of new cars and the fact every self respecting young woman carries a smart phone. The automobile is a bigger threat to Mexico than the drug cartels. You can’t have 21st Century cars in 19th Century cities too long before grid lock happens. And you cannot just build more roads. Trump will come and go, the car is eternal. I predict 20 to 1 peso before the year is out. Contrary to the article.

  2. Hello Robert,
    Mexico would not be the only country to suffer if a creature like Trump were to reach the White House. The US would find it self in the hands of a mad man and the rest of the world would not be safe either. As a Republican, I am ashamed of what my party has created and promoted.
    My vote goes to Hillary !

  3. Ok here’s the deal. Canada and Mexico are in the same delemma. Our biggest trading partner is the USA. Both our currencies are down for some unexplainable and illogical reason. . All 3 countries have been having “voter brain freezes” electing heads of Govt lately. We went with ” his dad was famous”, “looks good in a selfie” and he’s going to legalize pot. Mexico went with an elitist, “better to ignore the cartels than fight them”, “so what’s a little corruption” and oh ya, with some shoe lifts, also looks good in a selfie. Now the USA, our best friend, with way more people to choose from, is going to make our poor decisions look like we knew what we are doing. So American buddies, when your done the screwing around next month, we need to talk. I think we need to treat this like a hockey team. Before the next season of mediocrity, lets trade some players. Coaches: We will trade you Justin Trudeau for your president elect. Don’t care, either one. We just need to stop this ” hugs will cure what ails you, ” just borrow more money” , climate control without economics” train wreck up here. Then when either Clinton or Trump teaches us true capitalism, gives us a backbone, builds up our armed forces, builds a bunch of pipelines so we can use our own oil, we will trade her or him to Mexico. That should cure the dollar / peso issue. Could you imagine Trump sitting in Mexico City working on behalf of His team, Mexico making decisions on NAFTA. Lots of player trades will happen, we will even out the league of 3 nations and we won’t let Putin and the Russians play here any more.
    Oh ya, and this practise of using US currency in Mexico for real estate has got to stop!
    Eh?

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