In 2023, the Mexican peso’s appreciation against the US dollar could have significant ramifications for both the economy and public finances, according to a recent report from the Center for Economic and Budgetary Research (CIEP).
Their study highlights that a stronger peso might lead to decreased oil revenues and a reduction in per capita debt.
Notably, the Mexican peso isn’t the only currency to appreciate against the US dollar this year.
Currencies like the Colombian and Chilean pesos and the Brazilian real have also seen an upward trend.
The peso’s appreciation, around 12% in 2023 compared to the 2022 average, combined with a decline in the international price of Mexican crude oil, resulted in a 31.3% decrease in oil revenues during the year’s first half.
Factors such as positive growth expectations for the Mexican economy and the nation’s real interest rate have supported this currency appreciation.
Furthermore, the slow pace of US Federal Reserve interest rate hikes has stirred concerns about a potential slowdown or even recession in the US economy.
While a robust peso might be indicative of a thriving economy and help mitigate inflationary pressures from abroad, it could negatively impact sectors focused on exports and tourism.
Additionally, households receiving remittances and Mexican companies with dollar-denominated contracts might see decreased peso incomes.
Mexico’s economy, the second-largest in Latin America after Brazil, grew by 3% in 2022.
Private analysts surveyed by the Central Bank of Mexico predict Mexico’s economic growth to be around 2.5% in 2023 and 1.5% in 2024, primarily due to anticipated slowdowns in the US.