Fears grow as peso nears 20-to-a-dollar

Trump’s rise in the polls, government inaction could make matters worse

MEXICO CITY — The battered Mexican peso has tumbled to historic new lows in recent days, nearing a psychological barrier of 20 pesos to the U.S. dollar and causing anxiety on the streets, at businesses and in the halls of government.

Among other factors, many point to the recent rise in U.S. presidential polls of Donald Trump, the Republican nominee who has vowed to build a wall along the U.S.Mexico border and has been widely accused here of Mexico-bashing.

“There is a very clear relation with the (U.S.) electoral process,” Mexican President Enrique Peña Nieto told Radio Formula last week, linking Trump’s improved standings in the polls to the peso’s doldrums.

The Mexican currency recently plunged to a record low of about 19.90 to the dollar and has hovered near 20 to the dollar for days. Exchange houses are already posting signs offering a 20-peso exchange rate, a jarring sight for many here.

Despite official declarations downplaying the devaluation, some analysts are warning that things could get worse and assailing what they call government inaction.

“It appears that the authorities in charge of the politics, economics and finances of the country are flummoxed, paralyzed by the magnitude of the devaluation,” wrote columnist Enrique Galvan Ochoa in Mexico’s La Jornada newspaper. “And the effects of the phenomenon could extend to the large companies of the private sector, deeply indebted in dollars.”

Peña Nieto, already facing recordlow approval ratings, lamented that many Mexicans view a falling peso as “synonymous with a crisis.”

But the president told Radio Formula, “This cannot be associated with an economic crisis.”

He blamed external factors for the current “volatility,” singling out the “enormous uncertainty” of the upcoming U.S. presidential elections and polls showing Trump gaining ground.

Economic worries

Economists cite a number of other causes, including the drop in oil prices since mid-2014, Mexico’s generally sluggish growth and predictions of a U.S. interest rate hike.

Whatever the reasons, the plummeting peso has generated considerable concern. As the president noted, many here inevitably link a decline in the currency’s value in relation to the dollar as an indicator of economic distress — even an impending economic meltdown.

The peso has dropped almost 14 percent in value against the dollar this year and nearly 50 percent since September 2014.

“This is worrying because in Mexico, history and experience tell us that very strong economic crises follow when the peso weakens against the dollar,” said Pedro Mendez, 63, a retiree. “Of course the government says not to be concerned. But they rob with open hands!”

While inflation officially remains low — beneath the central bank’s 3 percent annual target — many here complain of fast-rising prices of food and other basic items, stretching already strained family budgets.

“Prices have been rising for months,” said Rosa Maria Tellez, a nurse and mother of three. “Now you go to the supermarket and pay double, or leave with half the products you could have bought a year ago. This business with the dollar will only make it worse. … Everyone raises their prices and says it’s because the dollar increased in value.”

Alberta Torres, 56, who sells food from a street stand, says customers are purchasing less these days, complaining that their salaries are not sufficient.

“The economic situation is worse every day. We don’t have enough money in our pockets,” said Torres. “One has to go in debt and borrow to finish off the month.”

But not everyone here is bemoaning the peso’s decline.