Economy 30-10-2018

Mexican peso suffers the worst depreciation since November 2016

The cancellation of the New Mexico International Airport project caused the currency of that country to register "its biggest daily depreciation since November 9, 2016", when the market reacted to the triumph of Donald Trump in the US presidential elections, reported the Banco Base Financial Group.

"The peso depreciated 3.62%, that is to say 70.1 cents, trading around 20.06 pesos per dollar and reaching a maximum of 20.11 pesos per dollar (...), as a result of a higher risk perception for the peso. country, after President-elect Andrés Manuel López Obrador confirmed that he will cancel the project of the New Mexico International Airport (NAIM)."

The port terminal was being built in the dissected lake of Texcoco, near the current international airport.

Its cost was estimated at 15,000 million dollars, for which about 6,000 million dollars were issued in bonds, according to the report of Banco Base.

"The cancellation of the NAIM also puts the credit rating of Mexico at risk, due to the uncertainty that is generated about the new administration," the bank's analysts say.

The president-elect said he will comply with a consultation organized by his team, in which almost 70% of the respondents voted in favor of expanding the military air base of Santa Lucia and Toluca airport instead of building a new air terminal.

"Beyond the economic impact that may have on those involved in the project, (the decision) raises doubts about how the new government will conduct its public policies," estimated the institution.

The private bank considers it important to note that with the depreciation of this day, the Mexican peso "completely wiped out its annual advance, now showing a depreciation of 2.05% in the year," the report says.

At the close of the session, the peso was "the most depreciated currency" of those that operate in the foreign exchange market.

For its part, the capital market also suffered sharp falls in a widespread manner.

The Index Prices and Quotations (IPC) of the Mexican Stock Exchange (BMV) "closed with a decline of 4.2% or 1,924 points, to settle at 43,879 points, new minimum closing in 2018", continues the financial report .

The CPI accumulates a decline in the year of 11.09%.

The aversion to risk in Mexico was also reflected in the money market.

In the session, the rate of return on sovereign bonds of Mexico at 10 years (M) registered an increase of 38 basis points to 8.73%, "level not seen since September 2009".

The increase in the rate of the M bonds implies that their price decreased as a result of the investors selling positions in said bonds, "which could have involved an outflow of capital from the country," warns the analysts' document.

Another relevant point is the way in which the public consultation was carried out.

The doubts about the conduct of the economic policy of the new administration, which will take office on December 1, "will keep the perception of country risk high", which will continue to represent a factor against the peso in its price against the dollar, notes Bank. Base.

For this reason, it is likely that the exchange rate will continue to rise gradually to the level of 20.50 pesos per dollar, says the estimate.


Consulte a nuestros especialistas