San Diego Union-Tribune (Sunday)
DOLLAR’S DECLINING VALUE DOES HAVE A NOTICEABLE IMPACT ON ME
Driving through Tijuana, the vibrant currency exchange houses adorned with blinking neon signs are hard to miss, each offering slightly better exchange rates than the last or boasting zero commission fees. I usually drive right past these places because most businesses in Baja California accept both U.S. dollars and Mexican pesos, allowing the convenience of paying with either currency. I’ve never taken the time to calculate the savings afforded to someone who religiously exchanges their dollars to pesos. I always thought that the money I might save wasn’t worth the mild inconvenience of an extra stop along the way to Mexico. However, it’s worth noting that when you pay in dollars in Mexico, your change is typically returned in pesos. It doesn’t work both ways, unfortunately, which is why I’m usually met with a hearty laugh when I make my favorite joke at U.S. cash registers: “Can I pay in pesos?”
Personally, I have always been fascinated by Mexican money. Its colorful and imaginative designs are evocative of the vibrant culture and friendly people that make Mexico so unique. Having lived south of the U.S for 11 years and regularly crossed the border for over 20, it’s rare to find me without a wallet holding both dollars and pesos. Over those 20 years, the exchange rate between the Mexican peso and the U.S. dollar has changed drastically. In the early to mid 2000s, approximately 10 pesos equaled one U.S. dollar. Over time, that ratio changed. By 2018, it had more than doubled, taking nearly 20 pesos to match a single dollar and getting up as high as about 24 pesos to the dollar. A 20 to 1 ratio stood stable until recently. Starting in early 2023, those blinking neon signs started to signal a drastic shift in the exchange rate as the dollar lost nearly 20 percent of its value in just a few months. As of Friday evening, the exchange rate was around 17 pesos to one dollar, up from 16 earlier in the year.
Now I’m not an expert in global currency fluctuations, but I am aware of how significant changes in the exchange rate can impact the cost of goods and services, depending on whether you earn dollars or pesos. For those of us who earn in dollars but spend in pesos, the decline in the U.S. dollar’s strength has resulted in an about a 15 percent increase in the cost of everyday goods and services. Conversely, those earning in pesos and spending in dollars now find things to be about 15 percent cheaper when traveling to the U.S. (not taking into consideration inflation, of course). Even though this puts us Americans at a disadvantage, I find it hard to get upset about it. We’ve had it pretty good for a long time.
The declining value of the dollar does have a noticeable impact on my life. This may sound silly, but one of the
biggest challenges for us gringos comes down to math. Simple calculations for costs have become more challenging. I used to divide prices by two and move the decimal place over to quickly convert from pesos to dollars, but now, with a more complicated 17:1 exchange rate, my on-the-spot conversion has become tricky. Plus it took me a while to break the habit of that 20:1 fast math conversion, which led me to make some expensive purchases based on my faulty calculations.
Now it takes more time to bring up the trusty cell phone calculator and make sure I know the actual price of things. Turns out a 15 percent across the board increase (plus the already increased prices due to inflation) has a significant effect on my bottom line. While I might have historically gone out to eat with reckless abandon and no regrets, lately I’ve been reconsidering the frequency of such excursions. It’s just gotten too expensive.
It’s not all a loss. An interesting phenomenon in Mexico is that some landlords (including mine) charge their tenants in dollars instead of pesos, assuming the dollar’s long-term stability would protect them from peso fluctuations. However, the recent shift in the value of the dollar means now landlords are receiving about 15 percent less rent than before. Some landlords have responded by changing their rent prices to pesos, something I hope my landlord won’t do (fingers crossed!). Of course, by switching the rent to pesos, landlords are making a bet that this weakened dollar is a long-term condition. Maybe they know more about global currency fluctuations than me, but I’m not sure I would make that bet.
The way I see it, the fluctuating exchange rate between the U.S. dollar and the Mexican peso significantly affects both residents and visitors in Mexico. Whether you’re paying in dollars or pesos, the recent changes have their pros and cons, making it essential for us all to stay financially aware and adapt to the evolving economic landscape. For me, even with that 15 percent across the board increase in prices, Tijuana still remains significantly more affordable and financially accessible than California. Sure I have to watch my spending and go out one less time per month, but how anyone affords California is beyond me.