The parity of the peso against the dollar is very important for the Mexican economy due to the close relationship that exists with the United States and has an additional sociopolitical burden due to this mania for many decades of making the Mexican currency a kind of national symbol.
Today, the peso-dollar relationship has nothing to do with what it was in the last century when a closed country maintained a fixed parity in a country that traded little, but borrowed heavily abroad.
The flag of the great crises of the last quarter of the last century was that of devaluations. Along with the exchange loss, the Gross Domestic Product collapsed, inflation and unemployment skyrocketed. But there it remained for the memory how the dollar went from 12.50 to 24 pesos, then to 100, to 1,000 and later, with three fewer zeros, always constantly rising.
With the profound financial changes at the end of the last century, we gained a free peg that has matured into what we have today, a solid exchange rate that reacts more to market conditions, yes also to the state of Mexican financial health, but less to the internal political condition.
That mature exchange rate today shows us how, under the credible threat of damage to the Mexican economy by Donald Trump and the pandemic, the price was able to exceed 24 pesos per dollar in March 2020 and then return to the current 17.50 pesos per dollar yesterday.
There is no triumph of the current regime in that parity, on the contrary, the Mexican economy shows its resilience before a government that is close to stepping on the red line of illegality.
High interest rates, an investment grade economy, a liquid market with easy access and, above all, a weak US dollar against the basket of world currencies.
A strong peso makes imports cheaper, but makes Mexican products more expensive abroad. Charging only 17.50 pesos for each dollar that migrants send decreases the purchasing power of recipients in our country.
The dollar at these prices lightens debts in foreign denominations and encourages capital outflows, but makes foreign investment expensive. All seasoned with high interest rates that skew the opportunity cost.
What must be addressed is that the United States has consolidated a rapid return to more controlled inflationary levels that once again mark a differential in the advance of prices with the Mexican economy that must eventually be reflected in the exchange rate.
In the middle are monetary policies, of course, but they will also have to adjust to this reality.
What must be very clear is that the price of the peso will change and the dollars will eventually rise. Faced with this inevitable movement of the market, it will be necessary to take it for what it is and not feel that the national symbols that remove the traumas of the devaluations of the last century are sullied.
