2023-07-13 00:00:00
Investors from the United States, China, Japan, Germany, Switzerland, Israel, Argentina, South Korea and other countries that take advantage of nearshoring—some that move companies out of Asia to bring them to Mexico and others that expand operations in the country—are it makes the construction of plants more expensive due to the superweight.
“There are already several of us who have expressed that the strength of the Mexican peso against the dollar is beginning to cause various damages to the country’s real economy,” declared Alejandro Gómez Tamez, general director of the Confederation of Industrial Chambers (Concamin).
The businessman declared that the direct foreign investment that arrives in Mexico becomes more expensive for the international investor.
“Imagine that building an industrial plant that costs one billion pesos, (at an) exchange rate of 20 pesos per dollar is a plant of 50 million dollars, but at the exchange rate of 17 pesos per dollar, a plant of almost 59 million dollars”, stated the economist graduated from Tec de Monterrey.
This Wednesday, June 12, the exchange rate closed at 16.8870 pesos per dollar, a level not seen since 2015, according to the Bank of Mexico.
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From January 2 to July 12, 2023, the exchange rate has appreciated more than 13.29%, the central bank added.
The increase in the price of exports in dollars makes them less competitive, slows their growth and generates lower profits for exporting companies, commented Gómez Tamez in the analysis “The exchange rate and the problems for the national industry”.
“The lowering of imports, which displaces national producers. Although it should be noted that this does not necessarily translate into lower prices for final consumers”, pointed out the director of Conamin.
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He recalled that it is common practice that with a cheap dollar, importers simply buy the foreign product at a lower price in pesos, but continue to sell it at the same final price in the domestic market, thus increasing their profit margin.
“Another common practice is that the company that has national and foreign suppliers simply uses the argument of a lower exchange rate to make its national suppliers lower their prices with the threat that they will stop buying from them,” said Gómez Tamez. .
The superweight makes the construction of the factories and plants to be installed more expensive, although Mexico is extremely competitive for the T-MEC, declared Larry Rubin, president of the American Society of Mexico (Amsoc).
“Mexico continues to be very attractive, despite the fact that it is more expensive to operate in the country,” said the businessman.
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He added that the strength of the peso benefits some and affects others, especially exporters.
“The strength of the peso does reflect a stable economy, we believe that the peso as a global currency has been playing a predominant role, just like the Colombian peso,” said Rubin.
The currencies of Mexico and Colombia are the international currencies that today are being properly evaluated in the markets, he said.
“We believe that in 2023 it will behave quite positively and the peso will continue with this strength. While for 2024 it will be a different photograph, not drastically, but different”, said the president of the American Society of Mexico.
The superweight is impacted by the number of companies that are considering settling in Mexico to sell to the US market: “That is the reason why they are establishing themselves and that is why nearshoring takes a predominant role.”
As long as the peso is with this strength, a positive economic situation will be created for Mexicans, added the business leader.
However, the appreciation of the exchange rate affects important sectors such as agriculture, which export much of their product to the United States, Rubin pointed out.
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