The rating agency Moody’s recently predicted that the Mexican peso is about to suffer a The estimate has been described as “exaggerated” by some analysts, but what are the worst depreciations that the peso has suffered in recent decades?
Economists such as the deputy governor of the Bank of Mexico, Jonathan Heath, believe that the forecast of an imminent depreciation of the peso is exaggerated or, in his case, unlikely given the current conditions for the Mexican currency.
Gabriela Siller, director of economic analysis at Grupo Financiero Base, believes that for the exchange rate to reach 24 pesos per dollar, there would have to be a crisis similar to that of 2008, high fiscal deficits or a Trump-type threat.
However, there are historical records with even greater depreciations of the peso, such as the one that occurred when Donald Trump threatened to disappear NAFTA during the government of Enrique Peña Nieto. When López Obrador came to power, on December 1, 2018, the exchange rate was quoted at 20.0775 pesos per dollar. This Monday, October 24, the exchange rate closed at 19.9285 per unit, according to the Bank of Mexico.
Here are the 9 strongest depreciations that the peso has suffered in recent history.
Between February 17 and April 6, 2020, the peso depreciated 39.2% against the dollar, when the exchange rate went from 18.52 pesos per unit to a record 25.78 pesos per dollar. This was due to the arrival of the covid-19 pandemic that collapsed the economy, put the country’s exports on hold, as well as tourist activity.
It is one of the worst depreciations of the peso, but there are other more serious ones.
2018 presidential election
Given the imminent victory of Andrés Manuel López Obrador and his promise to cancel works such as the International Airport in Texcoco, the peso depreciated 16.84% between April 17 and June 15, 2018.
Two deep depreciations in the era of Enrique Peña Nieto
Under the government of Enrique Peña Nieto, the Mexican peso lost more than half of its value against the dollar. And he ended his six-year term with levels close to 20 pesos and even close to 21 pesos per dollar.
Between May 9, 2013 and February 11, 2016, the peso depreciated 62.90%, when the exchange rate went from 11.93 pesos per dollar to 19.44 pesos per greenback, in that period. This was due to the arrival of Donald Trump to the presidency of the United States, with his promises to break trade agreements with Mexico, in addition to the start of an upward cycle of Federal Reserve rates in the United States.
But it would not be the only depreciation in the administration, because while on April 28, 2016 the peso returned to a level of 17.05 units per dollar, by January 11, 2017 the exchange rate was already quoted at 22.03 pesos per dollar. A depreciation of 29.25%, in the face of new attacks from Trump and votes in the United Kingdom to leave the European Union.
Crisis fiscal and Europe
Between May 2, 2011 and June 1, 2012, the peso fell 27.18% against the dollar. This was due, according to Gabriela Siller, to the crisis of fiscal deficits in Europe and the risk of Grexit, Greece leaving the European Union.
The exchange rate went from 11.48 to 14.59 pesos per dollar in that period.
Great Recession of 2008-2009
Considered one of the worst financial crises in history, the 2008-2009 crisis in the United States caused the peso to depreciate 58.15% between August 4, 2008 and March 9, 2009.
The exchange rate in this period went from 9.85 to 15.58 pesos per dollar.
The dot com crisis and the 9/11 attacks
Also known as the internet crisis, the crash of the financial markets in 2001 caused a depreciation of the peso that deepened with the September 11 attacks in the United States.
While the exchange rate was quoted at 8.91 pesos per dollar on May 21, 2001, the exchange rate deteriorated 31.27% as of May 10, 2004, the time it took for the North American economy to recover. By that date the dollar was already worth 11.70 pesos.
Between October 21, 1997 and January 13, 1999, the peso lost 39.9% of its value, due to the drop in oil prices, the deterioration of the terms of trade and the contraction of capital flows since the Exterior. All this in the midst of the crisis in the economies of Southeast Asia.
In the so-called first great crisis of globalization, due to its propagation through world financial markets, the exchange rate went from 7.70 to 10.78 pesos per dollar.
This event refers to the crisis that unleashed a series of . Among them, the most important was to inform in advance the devaluation of the peso.
The pressure of public finances, capital flight and the lack of reserves in foreign currency led to the release of the exchange rate or free float. In this way, it went from a ratio of 3.09 pesos per dollar to one of 8.20 pesos per dollar between March 1993 and November 9, 1995.
The depreciation was 165.20% .