📊 The Super Peso
The Mexican peso is outshining the rest of the world.
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Economy 💱
The US dollar hasn't been this cheap for Mexicans since December 2015. What are the implications of a strong peso and a cheap dollar from Mexico's powerful neighbor?
First, there's the good: Mexican businesses and consumers can buy foreign goods, invest, and travel more inexpensively, leading to stronger commercial relationships and quality of life. Also, as foreign investors expect the peso to continue rising (thanks largely to the broader macroeconomic trend of nearshoring), they inject more capital into the country, creating more jobs and economic prosperity.
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Then there are the potential downsides: Mexican goods are more expensive, which can hurt trade, the country's most significant economic activity. A strong peso also makes tourism more expensive, which accounts for 9% of the overall GDP.
By most measures, including tourism, Mexico is overcoming the hurdles that a strong peso could bring. So much investment has been announced this year by manufacturing and technology companies that it's hard to keep up. It's also hard to imagine the usual cons of a strong currency outweighing the current economic boom.
After all, the dollar being the historically strongest currency didn’t stop the US from becoming the biggest economy on the planet. Speaking of "strongest," in the past five years the Mexican peso has appreciated the most out of the 20 main currencies in circulation, even beating the Swiss franc by a small margin.
In recent years, Mexican companies and investors have found that expanding into the US market is increasingly affordable. According to the US Bureau of Economic Analysis, Mexican direct investment in the United States went from $19.5B in 2019 to $33.7B in 2022 (latest data available), a remarkable 73% increase.
Renowned Mexican brands like Grupo Bimbo, Cemex, and Arca Continental are doubling down on their presence up north, from acquiring local businesses to opening new manufacturing plants. Mexicans are also now the top foreign buyers of US real estate.
The big question on everyone's mind is: How long will the super peso and economic boom last? Nobody ever knows, but one thing is clear: Mexico's momentum is one of the most exciting in the world.
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Comment of the Week 🗣️
Marcelo brings to our attention a brand we’d never heard about: Sweet & Coffee in Ecuador. After looking into it, they have also managed to serve the country’s appetite for coffee. Starbucks is set to open its first store in Ecuador this year. In response to our Juan Valdez chart on Twitter.
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