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If Trump Wins in 2024, the Peso Could Depreciate

By: Alejandro Díaz-Bautista, Economist and Researcher (PhD).

  • The “super peso” is impacting remittances sent from the United States to Mexico in 2023.
  • The “super peso” is putting pressure on the country’s exports and money sent from the United States to Mexico.
  • The Mexican peso is among the most exchanged currencies in the world.

Globally, the Mexican peso has established itself in the 21st century as an attractive currency for international conversions and transactions. Mexico is profoundly affected by the economic policy decided upon by our northern neighbor, the United States, as it is our primary commercial and financial partner in the world. Our economies have mutually benefited from the North American Free Trade Agreement (NAFTA), the United States-Mexico-Canada Agreement (USMCA), and economic integration.

It’s important to note that approximately one-third of our GDP comes from international trade, with 80 percent of this trade conducted with the United States. “A potential victory by Donald Trump in 2024 would lead to the depreciation of the peso,” noted international economist, professor, and lecturer at El Colegio de la Frontera Norte (El Colef), Dr. Alejandro Díaz-Bautista.

One year before the elections in the United States, signs are already emerging that the ascent of the magnate could be affecting the peso, causing some volatility. According to data from the Bank of Mexico (Banxico) and the latest triennial survey from the Bank for International Settlements (BIS), the Mexican peso is one of the most widely used currencies in global foreign exchange operations among emerging market currencies.

This situation explains to a large extent the volatility that the Mexican peso has experienced in recent months. The Bank of Mexico has explained that the behavior of the exchange rate has also been influenced by factors unrelated to the country’s economic fundamentals, including the use of the peso as a risk hedge in other emerging economies, in part due to the depth of the international market for our currency.

The International Monetary Fund has indicated that the Mexican peso is one of the top 10 currencies traded by investors since 2013, especially in exchanges for U.S. dollars in currency swaps and spot transactions.

In the early hours of Tuesday, August 29, the Mexican peso extended its losses against the dollar recorded at the beginning of the week, following the announcement that the Mexican economy had lower growth than estimated in the second quarter. This has contributed to the volatility of the Mexican peso in August 2023.

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