Super peso: how the price of the Mexican peso affects the receipt of remittances

He super weighta denomination that the Mexican peso has adopted in recent times, continues to demonstrate its superiority and strength against other currencies of emerging countries in relation to the dollar.

Positioned as one of the most important currencies with a market share of 7.8%, the super peso is behind China, which has 36.1% and the rupee India with 8.4%, according to data from the Bank for International Settlements.

In this line, the value of the super peso, which has remained solid during 2023, brings with it a number of advantages as well as negative effects for remittances from foreign countries.

What reasons explain the appreciation of the Mexican peso?

During the last stretch of 2022, the super mexican peso increased its value by up to 20 pesos per dollar. However, so far in 2023, the Mexican peso has fallen in value with respect to the North American currency.

Even so, some of the reasons that explain its good performance can be found in the appetite for risky assets in the United States.

The wide interest rate differential with the United States, the government’s strict fiscal stance, the country’s sound external finances, high operability of the peso, and mixed macroeconomic and corporate data in the United States, are some reasons that explain its strength.

How are remittances entering Mexico affected?

Although the Mexican government boasts the record of remittances, the value of the super peso works against the recipients.

According jesus cervantesdirector of Economic Statistics and coordinator of the Forum on Remittances from Latin America and the Caribbean of the Center for Latin American Monetary Studies (Cemla)remittances grew by 27% and 12.9%, in constant dollars and pesos, compared to 2021, of 13.4% and 4.2%, respectively.

The strength of the exchange rate does not favor Mexican recipients, he said in a dialogue with the Vanguardia de México media.

And it is that, the more dollars were sent to Mexico, the fewer pesos were received per dollar sent, the specialists warned.

In addition, Gabriela Sillerdirector of Economic Analysis of Banco Base, He assured that in the last two months of 2022, the purchasing power of remittances in Mexico fell 11.1% and 1.9%, annually in constant dollars and pesos.

Cervantes explained that exporters of goods will be affected, since their price is relatively fixed in dollars. This is also the case, for example, of automotive exports.

What are the advantages of super weight?

On the other hand, the rise of the Mexican currency brings with it a series of advantages for the benefit of Mexican investments.

According to the experts, these are the advantages that the consolidation of the value of the super weight brings.

• Aid to lower inflation, as they cause lower imports.
• increases the return on investments in pesos when converted to dollars, which can encourage greater portfolio investment flows.
• Aid to companies that have debts in foreign currencies and income in Mexican pesos. Less amount in pesos per dollar of debt, which is favorable.
• decreases interest paid on external debt, being lower when converted to pesos.

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