Sunday, May 22, 2016

Mexican Peso vs. US Dollar

In January 2016 someone told me that by the summer the peso would be in the 18 range.  I thought that was probably not possible, BUT, it is reality.  It has been for about ten days.

Today the peso is 18.35 to the dollar.  Now, if you go to an exchange house or bank that will not be what your exchange rate will be unless you're a prime customer.  The bank makes money off this situation.

But, for us "foreigners" as the Mexican government refers to us, it is a good day for us.  For our Mexican neighbors, not so much.  Obviously their pesos buys less.

When I moved here the peso hovered between and 8 and 9 pesos to the dollar.  In essence, it is as though somehow I've gotten a pay raise.

Except for the fact that when the peso declines, the prices go up to make up for the decline.  Still in all, it is
amazing how much 200 pesos (about $10USD) will buy in Mexico.

I know when I go to  Texas this coming week that I will suffer sticker shock the whole time I'm there.
Whether I"m dining out, shopping or whatever, I'll inwardly be cringing at the prices.  Hence I'll only
buy what I need to bring back.  Things such as food products that I use in cooking that I still cannot
get in Mexico along with some US fabric for sewing for a project that I want to make.  Those things
among a few others.

Possibly the low peso might have something to do with all the new manufacturing plants that are opening near San Miguel.  Although I doubt it because those projects are typically a 3-5 year project in the works before fruition.  Three new plants here are from Germany, all clean manufacturing for the aerospace and automotive industries. 

I noticed the last time I was in Guadalajara that there were welcoming flags and billboards that welcomed Lufthansa to Guadalajara!  At that time there was talk of non-stop flights to Germany.  Now that makes sense as I've discovered that Germany is investing heavily in Mexico.

Add to that, Hyatt announced a flock of new projects in Mexico.  One, an "extended stay" hotel in Mexico City, will be located adjacent to the ABC Hospital facilities.  This hospital complex was just named one of the top ten in the world along with the Texas Medical Center which was named #1.  It's good to know that there is a medical facility of that stature in Mexico.

Mexico is changing daily.  Foreign investment has surged over the last fifteen years and I imagine a day when it will be hard to travel the back roads and find indigenous villages that have not been impacted by the outside world. Thankfully over forty years ago, I was able to visit many of those magnificent places.

No more need to buy gasoline when you see a "No fumar" sign.  Pemex is building at a rapid rate.  In fact, US gasoline companies are coming in to build stations!  Hard to imagine, truly.  Never thought I would hear or see that in my lifetime in Mexico.  The photo above was taken about 20 years ago while driving to Ixtapa and there were no gas stations for about four hours.  I was thrilled to be able to stop at this makeshift place for gas on the side of the road.  The sign "Peligrosa" and the plastic containers told me that it was gasoline!

It certainly, IMHO, is no longer a ""third world"  country!.


Peter Kouwenhoven said...

The future looks good for Mexico, when we visited your lovely town we met many highly educated, perfectly bi-lingual young Mexicans. Definitely not a third world country...

Billie Mercer said...

You are so right about the changes in Mexico but I think the peso vs. the dollar or any other currency has more to do with a country's currency on the global financial market. In my opinion, we could see some drastic changes in the value of US currency due to the results of the Presidential election this Fall.

Tell me where you are going to shop so I can buy some stock in the company before you go. You haven't been to the US in a while so you might cause a real surge in the stock price. I'd like to buy low and sell high. LOL


crynoutloud said...

I have a hunch that Mexico is on the verge of some serious exploitation. More U S companies are moving business there. Japanese and now as you said German companies are opening there. Don't be surprised to see Chinese companies very soon. They want to be closer to the biggest consumers in the world. The U S. I hate to see it happening, but how could it not. Once the Bankers and the Wallstreet boys get the scent of money to be made, look out. How is the Mexican Government and people going to handle it? Changes in the U S happen so fast it's crazy.
And then there is always the possibility of more millions of retired moving down there. But I hope not.

Babs said...

Ha, ha, ha Billie, it has been a YEAR since I've been shopping at all! It's true that I'll be shopping but seriously doubt that there will be a stock surge.

You bring up an interesting point. It will be interesting to see what happens after the Presidential election. I'm afraid to think about it.

Babs said...

Peter, interesting point that you brought up, "highly educated" in many ways is a new phenomena for the middle class. It is a very good thing to see.
A middle class family I know here has three children who I met when they were little. Now, all three have graduated from college with professional degrees. It is a beautiful thing to see. Kudos to their parents for all of their hard work.

Babs said...

Cry n out loud - The Chinese of old have always been here. They built the railroads and have a big part in the leather industry in Leon. We have many Asian tourists here in SMA.
The government is very, very careful about investment. To do business in Mexico, one must have a Mexican counterpart. Well, at least that was the way it was when I was doing business in Mexico. I don't think it has changed.
Another thing I observe on a regular basis is that the Mexican people are not materialistic to the degree that they are in the USA. Hopefully that will not change.
Their contentment with the fact that family is the most important thing is one of the reasons that I love being here.

Retired Teacher said...

The exchange rate becomes most apparent to me when I receive my credit card statement after a trip to Mexico. Dinners for two at a nice restaurant when converted to dollars are less than it would cost me to dine by myself up here.
I am no economist, but I believe the weaker peso is due, not just to the dollar's strength worldwide, but also to the decline in oil prices.

Babs said...

Yes, Bill, I get my US money to live on monthly through an ATM machine. So 8000 pesos is about $450USD! And, as you say, dining out here in Mexico is a treat. The food is delicious and the cost is nominal.

Interesting to me was the fact that last January someone told me the peso would be in the 18 range this summer..........and it is! So it appears to me that there is some way to manipulate it. I have no idea how, but I leave all that stuff to others nowadays.

Yes, the price of oil impacts this economy, but still the #1 source of income for Mexico is remittances with oil revenues #2!

Steve Cotton said...

As long as our Mexican neighbors are not buying imported goods, the fluctuation between the dollar-peso exchange rate has next to no effect upon their daily purchases. But, if like me, a person buys a lot of imported goods, the peso price of those goods will be higher. As long as my base currency is the dollar, though, I still end up paying close to the same cost.

In reality, the fluctuation has little meaning for those of us who live here all year permanently, we just get to ride the roller coaster and pay more or less for things as it changes. Today is a good day for we dollar holders.

So, buy away in Houston.

Babs said...

Well, Steve, in theory that would appear to be logical. But, unfortunately, what happens is as the pesos devalues, the merchants up the prices and they never come back down again when the peso strengthens. So, the Mexicans buying power is dramatically affected adversely.

I hardly buy anything anymore that is imported except that yesterday I had to buy an ink cartridge for my printer so I could print out my boarding pass for travel. I bought a cartridge about six months ago for 510 pesos. Yesterday, the same cartridge was 636 pesos. Quite a hike!

Yes, I'll buy away in Texas - like bringing a cartridge back for a lot less then they are in Mexico and a few other things like that! Not many frills, but necessities.

Thanks for your comment.

living.boondockingmexico said...

Excellent post Barb. I agree with all the comments. Mexico will be the fifth largest global economy by 2025, right around the corner. The aerospace industry now has a home in Queretaro and Mexico is offering degrees. Boeing and Embraer are opening offices and plants. The auto industry has practically moved from the U.S. to Mexico.

But keep in mind, everything is cyclical. How long will all of this last? I predict until about 2050 if there are no major global economic disasters. Just like the U.S. or any other country, you can't remain on top forever. This is Mexico's hay day and we should be happy for Mexicans and ourselves to see history taking place.

The days of a woman with a baby strapped to her back or the old man with a donkey carrying firewood although culturally interesting are ending as those same people want what the rest of the world has. I have to say that I miss a lot of the old Mexico but I got to live it and I am thankful for that. Now comes a new era where kids have a better chance to have what the rest of North America has; education, higher salaries, better living conditions and most of all prosperity.

Babs said...

Informative and eloquently written Chris. I couldn't agree more with your last paragraph. It is so exciting to see all the good things that are happening in this country for the people and the families!

Life's a Beach! said...

It's exciting to see how far our dollars stretch now on south of the border trips, but I hadn't considered the impact to the local economy back here in Tucson. I overheard a conversation at the mall today that retail sales are down significantly because of the devaluation of the peso. Usually the parking lot outside Macy's is jammed with Sonoran license tags, but I didn't notice a single one today.