The Mexican peso faced significant depreciation on Tuesday, with the retail dollar surpassing the 20 pesos ceiling, reaching 20.14 pesos for sale at CitiBanamex branches. This represents a 1.21% increase, or 24 cents above Monday’s close, marking a level not seen since December 2022.
The Mexican currency opened the day at approximately 19.60 pesos per dollar on international markets, reflecting a 1.26% depreciation or 24 cents compared to the previous day, according to Bloomberg data. The sudden drop in the peso’s value has raised concerns among analysts and market watchers.
Gabriela Siller, Director of Economic Analysis at Banco Base, attributed the peso’s depreciation to both internal and external factors. Siller noted that the initial optimism regarding a potential rate cut by the U.S. Federal Reserve had buoyed the peso. However, this optimism quickly dissipated following the approval of a controversial reform to Mexico’s Judicial Branch.
The reform, which was passed in general terms on Monday afternoon, has sparked widespread concern among economic analysts and legal experts alike. The Mexican House of Representatives is expected to discuss and potentially approve the reform when the new legislative period begins.
Siller emphasized that the proposed reform could severely compromise the independence of Mexico’s Judiciary. “The exchange rate is clearly showing an upward trend,” she noted, adding that the depreciation of the peso is largely driven by the internal risks associated with the Judicial reform.
The reform, if fully enacted, could have significant implications for Mexico’s economy and its trade relationships with the United States and Canada. Siller warned that the reform could deter new investments in the country and might even lead to a halt in the reinvestment of profits and hiring by companies already operating in Mexico.
“The potential impact of this reform on Mexico’s economy cannot be overstated,” Siller said. “It could push the Mexican economy into a recession, as investors may lose confidence in the country’s legal framework and economic stability.”
The Mexican peso’s slide is being closely monitored by both domestic and international investors, with many expressing concern over the potential long-term effects of the Judicial reform on Mexico’s economic prospects.
As the situation develops, all eyes will be on the Mexican Congress and the upcoming legislative discussions, which will play a critical role in determining the future direction of the country’s economy and its relationship with key trading partners.
The recent developments have cast a shadow over the previously optimistic outlook for the peso and the broader Mexican economy, underscoring the fragile balance between political decisions and economic stability in the region.
Further updates are expected as the legislative process unfolds and as market reactions continue to evolve in response to these critical developments.
The Mexican peso faced significant depreciation on Tuesday, with the retail dollar surpassing the 20 pesos ceiling, reaching 20.14 pesos for sale at CitiBanamex branches. This represents a 1.21% increase, or 24 cents above Monday's close, marking a level not seen since December 2022.
