It's Not Looking Good For Mexico

The Mexican peso is tanking and the Banco de Mexico is stepping in to try to contain the damage.

The peso has been moderately sliding against the dollar throughout the year, but has really fallen dramatically since the end of October.

Last Friday, it fell more than 2%.

At 14.79 pesos to the dollar today, it’s currently at its weakest since early 2009.

Earlier this week, the Mexican central bank announced that it would restart a dollar auction program — which it had previously used between 2011 and 2013  — in which the bank will auction off $US200 million US dollars on any day the dollar appreciates 1.5% or more against the peso.

On Thursday it intervened, according to headlines from Bloomberg.

Until recently, Mexico had been one of the rare emerging market economies doing really well. But a confluence of events is changing that.

There’s political unrest. The country, particularly Mexico City, has been engulfed in protests following the disappearance of 43 college students.President Enrique Peña Nieto’s approval ratings are down in the low 40sGDP forecasts for next year keep shrinking as economic data comes in soft.

And then there’s the falling price of oil — although there’s some evidence that this won’t have a huge effect on the country’s economy.

That said, this may just be a temporary blip. Auto exports were way up last month, and a recent IMF report praised structural reforms in the economy, and forecasted steady growth going forward.

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