Mexican Peso weakens versus US Dollar
By Adina Moloman
The Mexican peso has dropped to its lowest value in three years, slumping to $14.45 pesos a few days ago. Considering that the bi-national markets such as Tijuana-San Diego can be more sensitive to the fluctuating value of currency, it is interesting to look into it.
Strictly related to that, economist are making more emphasis on the gas price which goes up in Mexico, specifically in Tijuana the price is still only $10.18 pesos per liter, or $2.82 dollar per gallon, comparing to the gas price across border in San Diego where it is generally over $4 a gallon.
This gasoline gap price between US and Mexico has to do with the Mexico’s gasoline subsidy program, which cost around 4 billion dollars every quarter of the year. The subsidy program started last year and so far there are more than 16 billion dollars spent.
According to an economist from COLEF, Diaz Bautista, the subsidy is greater than the amount that goes to the Popular Insurance program or the “Opportunities” anti-poverty program, which why a proposition is eliminating the subsidies; The question is how to do that, without affecting the low income population on the one side and preventing that the energy subsidy blowing a hole in Mexico’s budget on the other side.
Another important variable that is behind this drop is the low sale price of oil barrel, where the oil prices have declined about $20 per barrel lately. This affects Mexico’s exports, who generally exports crude oil to other countries and continents, Western Europe for instance, which is passing through a recession period, not making it a good economic partner.
The Wall Street Journal economists consider that Mexico, with good economic outlook fell to levels on a broader loss of investor confidence on Mexico Corporation, but there is no need to panic. The Mexican peso pushed to weaker levels, might lead to additional measures from central banks to curb rising foreign-exchange rates. It is expecting improvements in the last quarter of this year.
