Mexico and the Super Peso A Tale of Two Surprises Jorge G. Gonzalez Trinity University International Business Forum.

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Presentation transcript:

Mexico and the Super Peso A Tale of Two Surprises Jorge G. Gonzalez Trinity University International Business Forum

Recent Economic and Political Events World economic weakness World economic weakness Mexican government gridlock Mexican government gridlock Mexico – U.S. relationship Mexico – U.S. relationship Iraq war and aftermath Iraq war and aftermath

Mexico’s Reaction Peso’s debacle? Peso’s debacle?

Exchange Rate Pesos per U.S. Dollar Source: Banco de México

Exchange Rate Pesos per U.S. Dollar Source: Banco de México

Mexico’s Reaction Peso’s debacle? Peso’s debacle? Capital flight? Capital flight?

Foreign Direct Investment Billions of Dollars Source: Banco de México

Mexico’s Reaction Peso’s debacle? Peso’s debacle? Capital flight? Capital flight? Economic crisis? Economic crisis?

Real GDP % Change Source: Banco de México

Mexico’s Reaction Peso’s debacle? Peso’s debacle? Capital flight? Capital flight? Economic crisis? Economic crisis? Fiscal crisis? Fiscal crisis?

Government Balance Balance / GDP Source: SHCP

Mexico’s Reaction Peso’s debacle? Peso’s debacle? Capital flight? Capital flight? Economic crisis? Economic crisis? Fiscal crisis? Fiscal crisis? Inflationary spiral? Inflationary spiral?

Inflation Source: Banco de México

Term Risks Short Structural Challenges Risks and Challenges

Super Peso Super Peso

Inflation Differential vs. Exchange Rate Inflation Exchange Rate Source: Banco de México

Merchandise Trade Billions of Dollars Source: Banco de México Imports Exports

Why Super Peso? Foreign investment Foreign investment Family remittances Family remittances

Family Remittances Billions of Dollars Source: Banco de México

Super Heroes

Super Peso Super Peso U.S. economy U.S. economy Mexican politics Mexican politics Term Risks Short

China China Rule of law Rule of law Human capital Human capital Infrastructure Infrastructure Fiscal reform Fiscal reform Poverty Poverty Structural Challenges

A Tale of Two Surprises? Economic stability is not a surprise Economic stability is not a surprise Super Peso Super Peso June 17 th, 2002 June 17 th, 2002

Source: Proceso, June 23, 2002 Pg. 41

Mexico and the Super Peso A Tale of Two Surprises Jorge G. Gonzalez Trinity University International Business Forum

Mexico and the Super Peso A Tale of Two Surprises International Business Forum