Bloomberg said on Thursday that the peso has gained 7.5 percent this year against the dollar beating every other major currency. Economists predict the peso will strengthen to as much as 11 per U.S. dollar, an 11% gain, before the end of 2010. Many commercial banks and institutional investors are now buying in Mexico, hoping to see their investments ride the coattails of the peso’s increasing power. Why is the peso so strong?
Mexico appears to be surging out of International Recession with a first quarter growth rate of 4.3% and up 10% over the last year, outpacing almost every other country. Despite looming drug-war headlines, Moody says Mexico expects $20 billion in direct foreign investment this year and continued growth trajectory for the remainder of the year. There are already over 18,000 American companies investing and operating in Mexico (Starbucks, Walmart, Blockbuster, Office Depot, GE, Bristol Myers Squibb) and over 1 million American citizens (more than any other country) who, live, work, invest and retire South of the Border with more on the way.
Investors are being lured away from dollars and other currencies by Mexico’s low national debt, minimal taxation, the recent burgeoning valuation of the peso, and the booming real estate investment sectors. In key areas, real estate investment growth in Mexico, like the peso, is far outpacing other countries. For example, Playa del Carmen in Mexico’s Riviera Maya, is now the fastest growing segment in all of Latin America and Tulum located just to the south, with its new International Airport plans, is poised to grow even faster.
Not very long ago in Mexico, it was more than easy to find a Mexican businessman who would eagerly take a U.S. dollar. Today they still take the bills, but they would much prefer the peso. At least for the moment, that trend seems to be growing in Mexico and around the world as well.
by Michael Zenn
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