Saturday, March 7, 2015

Today's Headlines: The Mexican peso's not what it used to be

As of yesterday, your Mexican pesos get you fewer U.S. dollars than they ever have. On the other hand, if you’re living off dollars — as many expatriates, retirees and tourists are — you get more spending pesos for your dollars then you could have at any point in history.
    El Universal, in its No. 3 front-page headline, tells us why: “Historic high for dollar.” What it means, of course, is that the dollar is at an all-time high against the peso. Which is the same as saying that the peso is at a historic low against the dollar, the point of view taken by La Jornada in its lead headline this morning: “Peso falls to 15.78 per dollar, the worst level in history.”
    (The foreign English-language press, using the closing interbank rate of 15.52, was less breathless in its coverage, calling it the highest rate in six years, a considerably shorter time span than “ever.”)
    Analysts quoted in the Mexican papers’ coverage (all five dailies fronted the news in one way or another) cite the Obama recovery in the United States and the rock-bottom world oil prices as factors. The former increases demand for dollars, as investors sniff interest rate hikes in the near future. The latter makes dollars scarcer in Mexico.
    La Jornada, however, implies that the blame lies where that paper usually likes to put it — on the Peña Nieto administration. Here’s the lead sentence of its story: “The peso has lost a fifth of its value since the beginning of the current administration on December 1, 2012.”
   The exchange rate was at 12.96 that day, meaning the cumulative devaluation totals 19.4%.  So the facts are right, though it's worth remembering that correlation is not always causation.
    Excelsior, whose editorial stance is 180 degrees from La Jornada’s,  goes with a different angle: “Banxico comes to the rescue of the peso.” Banxico is the Banco de México, the autonomous central bank. It stepped in yesterday by buying up pesos, injecting $200 million dollars into the exchange markets. If it helped at all, it would have been to prevent an even steeper peso slide.
    A more blatant demonstration of the two papers’ competing ideologies comes with their headlines for a related story based on the National Statistics Institute’s monthly consumer confidence report. Excelsior: “Consumer confidence grows.” La Jornada: “Consumer confidence also declines.” It's not the first time the two have clashed in their perception of reality.
    As for the historic high (or low) exchange rate, purists might point out that the peso sold for more than 3,000 on the dollar before the new peso was created in 1993, with three zeros lopped off. The resulting 3-1 rate didn’t last long, more than doubling after the peso crisis of 1994/95. Even that was less than half what it is now, but the plunge was sudden and disastrous, as opposed to the current cumulative peso decline.
    What happened then was a crisis. What's happening now is merely a problem. So far.

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