Super peso: how the value of the Mexican currency can be a risk for its economy

He super weight, a denomination that receives the Mexican peso for its good performance in the last year, has managed to position itself within the best positioned emerging currencies in the world. However, there would be factors that could jeopardize the economic stability of Mexico.

According to some specialists, although the Mexican currency has shown a slight fall against the dollar in the last week of February for the good of some Mexicans, the positioning of the super peso also affects remittance recipients and exporters.

Analysts point out that a level below 18.70 Mexican peso units per dollar puts macroeconomic variables at risk within the Mexican country. Likewise, according to what was reported by Diario Expansión, the risk that the corrections would cause lower growth in the Mexican economy would increase.

How can the super weight become a risk for Mexico?

The value of the Mexican peso against the dollar has shown a slight fall not seen since April 2019, but the truth is that it marks a new trend for the currency with the possibility of continuing to decline despite the 6% appreciation that it showed at the beginning of 2023. .

According to experts, such as Gabriella Siller, director of financial economic analysis at Banco Base, some of the negative aspects of a super peso are that with fewer pesos for each dollar, the exports and remittances are affected.

To this is added the disincentive for the entry of foreign direct investment, according to what was reported to Diario Expansión.

“A more depreciated exchange rate helps the economy that has been anemic and I think that the exchange rate is explained by external conditions, a fiscal policy that looks good in the photo but more by the rate differential,” Carlos Serrano, chief economist at BBVA Mexico, highlighted the “unfortunate” increase of 50 points.

“We are in a bad balance, for me the level below 18.70 pesos is problematic (…) the equilibrium is 18.79, below that level, it makes us vulnerable to corrections”, said Jessica Roldán, chief economist at Finamex, during an event organized by Bloomberg.

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.

• It helps to lower inflation, since they cause a reduction in imports.
• Increases the return on investments in pesos when converted to dollars, which can encourage greater portfolio investment flows.
• It helps companies that have debts in foreign currencies and income in Mexican pesos. Less amount in pesos per dollar of debt, which is favorable.
• The interest paid on the external debt decreases, since it is lower when converted to pesos.