By Reynaldo Mena
‘Super Peso”: Months ago, Antonio García’s life was flowing without concern. From the state of Texas, he sent 500 dollars each month to his family in Puebla, with which he met basic needs… That money was equivalent to 10,000 Mexican pesos.
However, with the revaluation of the peso, the same amount is now worth 8,500 pesos, a decrease of 1,500 pesos, the value of a week’s groceries. “It seems that it is not much, but it is a very large amount for us in Mexico,” says Laura, his wife.
Like them, hundreds of thousands of families are suffering from the strengthening of the Mexican currency. Although the Mexican president, Andrés Manuel López Obrador, has classified this valuation as an achievement of his government, the truth is that the export sector and the migrant community are the hardest hit. “A strong Mexican peso can make Mexican products more expensive in international markets. This can cause exporters to face greater competition from countries with weaker currencies and result in a loss of competitiveness,” says Carlos González, Director of Analysis at Monex.
The benefit of a strong exchange rate is already being discounted in the market and now the havoc is beginning to be tested because lower income from remittances, taxes from exporting companies, tourism and exports are beginning to be received oil companies “This is on the margin of no longer being so beneficial for the country,” González ditch.
The national currency has been boosted this week by the drop in inflation in the US and the subsequent decision of the Federal Reserve to maintain its interest rate in a range of 5% to 5.25%.
For Mexico, remittances are the second most important source of income after exports by contributing to the domestic market but above all by giving a break to the economy of Mexican families; however, since there is no increase in the situation, they continue the same, without significant growth. For three consecutive years, remittances sent from the United States to the country have placed Jalisco as the state with the highest deposits. Only in 2022 it received 5 thousand 403 million dollars.
However, remittances began to slow down last year and will surely do so more in the summer, when the recession in the US is more evident. To begin with, there is already a loss in the purchasing power of remittances in the last 5 months. Banco Base’s economic team points out that only in March the deterioration was 1.2%, but at an annual rate the weakening is 7.4%. In entities such as Sinaloa, this erosion of purchasing power, which is explained by inflation and the revaluation of the peso, was 18% per year, Tabasco 17%, and Nayarit and Michoacán 13%.
The drop in remittances, seen in real pesos, began in June and was more evident since October, in line with the strengthening of our currency against the dollar. “Well, now it’s a problem with no way out. Either my husband works more on ‘the other side’ or he has less money to eat. If the dollar continues to drop, we’ll be in trouble,” says Laura.
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