MEXICO CITY (appro).—Not everything is hunky-dory around the “superpeso”: if the appreciation of the Mexican currency against the dollar continues, the country would assume a cost of 75 thousand 555.6 million pesos, derived from lower oil revenues and due to a lower financial cost of the debt, warned the Center for Economic and Budgetary Research (CIEP).
This amount, he pointed out, is similar to the budget assigned to the Ministry of Environment and Natural Resources in 2023 of 75.6 billion pesos.
The document General Precriteria for Economic Policy (PGPE) 2024, prepared by the Ministry of Finance and Public Credit (SHCP), includes the sensitivity of public finances to changes in certain variables, including the exchange rate.
According to the Treasury, given the appreciation of 20 cents in the exchange rate, the net effect on the public balance would be -6 thousand 376 million pesos. This net effect (-0.02% of GDP) is derived from lower oil revenues of 0.03% of GDP and a positive effect on the financial cost of debt of 0.01% of GDP.
With this information, explained the CIEP, given that as of June 2023 the exchange rate had appreciated 2.37 pesos, that is, 11.9 times what was indicated in the PGPE, the net effect on the public balance would be -75 thousand 555.6 million pesos.
“These results are already being observed, as of June 2023, the appreciation of the peso against the dollar coupled with the fall in the price of the Mexican oil mix compared to 2022, have caused a reduction in oil revenues, that is, from Pemex and the Mexican Petroleum Fund, 31.3%”, added the CIEP.
Throughout 2023 the exchange rate has been appreciating against the dollar.
As of June, compared to the average of December 2022, the exchange rate had appreciated 12.1% in nominal terms, and was already compared to that observed in 2017.
The CIEP noted that although the federal government has indicated that said appreciation is due to proper management of the economy, this appreciation has not only occurred in Mexico. In Latin America, the Colombian peso has appreciated 12.0% in the same period, the Chilean peso 8.7% and the Brazilian real 7.5%.
Although a strong peso seems to obey a positive evolution of the economy and reduce inflationary pressures coming from abroad, some sectors such as those oriented towards exports and tourism could be affected.
Likewise, households receiving remittances, as well as contracts with Mexican companies entered into in dollars, would also see their income in pesos reduced.
remittances
In the case of money remittances made by Mexicans living abroad to their families, the average remittance as of June was 406 dollars, which multiplied by the average exchange rate of 17.24 results in 6,999 pesos, which was 14.0 % lower than what was obtained in May 2022 when the average remittance was 407 dollars, but with an exchange rate of 20.01 pesos per dollar (8 thousand 144 pesos).
Another important source of foreign exchange, in addition to exports, is the investment made by foreigners in the national financial system.
In this regard, the position of non-residents in government securities increased 12.9% as of May 2023 compared to what happened a year ago, reaching 92.1 billion dollars.
Likewise, the position of non-residents in variable income securities increased 24.6% annually in June of this year, to settle at 177 thousand 128 million green bills, according to figures from the Balance of Payments published by the Bank of Mexico (Banxico).
