MEXICO CITY: Mexico’s peso fell to its lowest real level against the dollar and the stock market dropped nearly 6 percent Monday to 21,611.5 as the country’s economy was pulled into the global economic crisis.
The Central Bank said the peso’s daily benchmark fixed rate fell to 11.8 per dollar — a sharp drop from 11.1 on Friday and well below rates of about 11.4 recorded in June 2006 and 11.6 in May 2004.
The nominal rate is the lowest since 1993, when Mexico’s government cut three zeros off the end of peso denominations to create a “new peso” worth 1,000 old pesos.
The currency generally tracks rises and falls in the dollar because Mexico’s economy is so tightly tied to that of its northern neighbor.
Mexico’s economy is often rocked by U.S. downturns because it sends the majority of its exports north and depends heavily on money sent home by migrants living north of the border.
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So far, Mexico has weathered the U.S. economic crisis with low inflation and revenues from this year’s high oil prices.
Joydeep Mukherji, Standard & Poor’s sovereign credit analyst for Mexico, cautioned that Monday’s devaluation and stock downturn didn’t mean that Mexico’s economy was headed for extended hard times.
“This turbulence is hitting Mexico at a time when the government is still running a budget surplus, not a deficit,” he said. “There is some local strength to withstand this pressure.”
He said Mexico’s banks aren’t as exposed to the global crisis as others in the world that lend to foreigners, and he played down the devalution.
“Even when the peso goes from 9 to 11 to 12, it doesn’t lead to a big change in day-to-day life,” he said. “It’s not as if all the prices in the stores are being marked up because the peso weakened against the dollar. People are still pricing things in pesos, not dollars.”
Mexicans were nervously watching the news at a local exchange house. Maria Almanza, a retired widow, said the devaluation means it costs her more to send money to her sick son living outside Houston, Texas.
“It’s bad,” she said. “If there’s a crisis there, there’s a crisis here. I do what I can to send him money, and now they’re charging me more.”
But Jose Martinez, 60, shrugged off the devaluation.
“This only makes people who have money nervous,” he said. “I’m poor, so what?”
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