The once-celebrated ‘superpeso’ era has come to an abrupt end, as the Mexican peso continues its downward spiral in the wake of external volatility and domestic uncertainty stemming from recent reforms introduced by President Andrés Manuel López Obrador (AMLO). The currency has depreciated by 16 percent against the U.S. dollar since the pivotal June 2 election, a stark contrast to the record appreciation seen just a year ago.
According to the Bank of Mexico (Banxico), the exchange rate closed on Tuesday, August 27, at 19.71 pesos per dollar, marking the highest level since December 2022. This figure represents a significant departure from the 16.96 pesos per dollar recorded on May 31, just before the ruling party’s presidential candidate, Claudia Sheinbaum, secured a victory in the June election.
As of Wednesday, August 28, the situation has worsened for consumers, with exchange houses and bank windows in Ciudad Juárez, located on Mexico’s northern border, selling the dollar for over 20 pesos. This development has effectively erased the ‘superpeso’ phenomenon of 2023, when the Mexican currency ended the year at 16.96 units, boasting a nearly 13 percent appreciation against the dollar.
Causes Behind the Peso’s Decline
The peso’s recent depreciation is attributed to a combination of external and internal factors. Alejandro Salvador Murillo, president of the Mexican Institute of Finance Executives in the Ciudad Juárez Group, emphasized the role of international market volatility.
“It could be anything from the many issues we have already mentioned, such as wars, the trade war (in the United States), or government reactions to the trade war, such as tariffs,” Murillo explained.
However, internal factors, particularly the reforms promoted by the ruling party Morena, also play a significant role. One of the most contentious reforms is the proposal to hold popular elections in the Judiciary, which has sparked concern among investors and market participants.
“Obviously, there are internal issues of public policy that are beginning to be discussed in Congress, and now with the new Congress, it is very likely that they will be approved and their long-term or medium-term consequences will be felt,” Murillo added.
Impact on Border Communities
The depreciation of the peso has had a tangible impact on residents living along the U.S.-Mexico border, particularly in Ciudad Juárez. Merchants in the area have experienced mixed effects, with both positive and negative repercussions.
Elizabeth Villalobos, president of the National Chamber of Commerce (Canaco) in Ciudad Juárez, highlighted the challenges faced by border merchants due to the peso’s decline.
“The negative impact when the dollar rises is that all the products that we regularly consume in the border area, due to the replacement cost effect, go up in price,” Villalobos noted.
Despite the economic challenges, Villalobos pointed out that there could be some benefits, particularly in the form of increased tourism from the United States. “More tourism, people who come to consume in restaurants, beauty salons, and consumption of other products and services, there is an increase,” she said.
For citizens who cross daily from Ciudad Juárez to El Paso, Texas, the depreciation of the peso has taken a toll on their purchasing power. Sandra Rascón, a resident of Ciudad Juárez, expressed her frustration while waiting in line at the Paso del Norte International Bridge.
“Those of us who come to El Paso to shop are affected quite a bit; yes, it affects us. Of course, those who work there (in the United States) and spend here (in Mexico), well, that’s great, but we are a little behind with that situation,” Rascón said.
The once-celebrated 'superpeso' era has come to an abrupt end, as the Mexican peso continues its downward spiral in the wake of external volatility and domestic uncertainty stemming from recent reforms introduced by President Andrés Manuel López Obrador (AMLO). The currency has depreciated by 16 percent against the U.S. dollar since the pivotal June 2 election, a stark contrast to the record appreciation seen just a year ago.
