The progress of judicial reform in Congress has dealt a new blow to the Mexican peso. The exchange rate closed this Tuesday at 19.71 pesos per dollar, a depreciation of 1.6% or 31 cents compared to the previous day’s close. The devaluation of the currency occurred hours after the Constitutional Points Commission of the Chamber of Deputies approved in general terms the opinion of the reform to the Judicial Branch, a step closer to its approval next September, once the new Legislative Branch, with a pro-government majority, takes over. Thus, this Tuesday, the Mexican peso was the most depreciated currency among the main crosses against the dollar. Since the presidential elections in Mexico, on June 2, to date, the Latin American currency has depreciated 15.58% against the dollar, going from 17.02 to 19.72 units per dollar.
As anticipated by financiers, the volatility of the peso against the dollar would be a constant as long as the reform of the Judicial Branch is carried out. In particular, the peso depreciated since Friday of last week, when the National Electoral Institute (INE) endorsed Morena and its allies, the PT and the PVEM, to obtain the qualified majority in the Chamber of Deputies, one of the requirements to carry out the changes to the Judicial Branch in the Constitution. The nervousness in the markets has been increasing, at the pace of the exchange of accusations between the Executive, the ruling party and the opponents of the reform, where opposition parties and business chambers have joined, as well as the ambassadors in Mexico from the United States and Canada. In fact, in response to these latest criticisms, López Obrador assured this Tuesday that his relationship with the US ambassador, Ken Salazar, is “on pause.”
Despite the obvious financial volatility of the last few days, López Obrador and his successor, Claudia Sheinbaum, downplayed the fall of the peso against the dollar and attributed the currency’s decline to external factors such as the unemployment figures in the United States or the rise in interest rates in Japan. “What has happened with the peso has nothing to do with judicial reform, it may be an influencing factor, but it is not essential, it is an international problem. There is no reason for there to be any nervousness about investments, about the markets, because of the strength of the Mexican economy,” Sheinbaum argued.
:quality(85)/cloudfront-us-east-1.images.arcpublishing.com/infobae/R6WLOO75WZAZJGRYCSTM5EBYFI.jpg?w=150&resize=150,150&ssl=1 "Dollar price TODAY: This is how the exchange rate is quoted in Peru, this August 29")
James Salazar, deputy director of Economic Analysis at CI Banco, anticipates that the peso will continue to depreciate once the new Congress takes office, and even warns that volatility could extend into October, when Sheinbaum finally assumes office as president of Mexico. “The dollar, in general, is falling, the reality is that the most depreciated currency is the peso. There are other external issues, but they are limited impacts and what is being observed, clearly, is pressure from the internal side, so September and October look complicated,” he details.
Salazar expects that the Latin American currency could cut some of its losses at the end of the week, if there are good economic indicators in the United States, a temporary breath of fresh air, given that uncertainty will continue in the coming weeks. “The short-term scenario is one of pressure, depreciation of the Mexican currency, there may be a respite, but it would be temporary and the point is that next September the issues of campaigns in the United States will also begin to intensify, in view of the American elections,” he explains. CI Banco’s base scenario for September is that the currency will reach 20 or 21 units per dollar, although by the end of this year it could drop to 19 pesos per dollar.
In addition to the peso’s crash, the Mexican Stock Exchange (BMV) closed Tuesday’s session with a loss of 1.3%, falling in five of the last six sessions and being the deepest drop for a session since July 18. Domestically, the losses of issuers such as Grupo México, Cemex, Banorte and Bimbo stood out. Financial specialists also attribute this drop to nervousness over the series of changes in the Judiciary.
For Salazar, the exchange rate and, in general, the Mexican financial market, will make their adjustments upwards or downwards as the implementation of the reform to the Judicial Branch advances and it becomes clearer whether the changes to the judicial system are made and new secondary laws are created. Although the specialist rules out that the implementation of this controversial initiative will scare away private investments for the next six-year term, he recognizes that this factor could discourage some disbursements by companies. “There was no need to start the new Administration like this, but it seems more like a stubborn will to do it like this,” concludes the financier.
Sign up for the free EL PAÍS Mexico newsletter and to WhatsApp channel and receive all the latest news on current events in this country.
Keynote USA
For the Latest News, Follow KeynoteUSA on Twitter Or Google News.
:quality(85)/cloudfront-us-east-1.images.arcpublishing.com/infobae/QGI2YBDX2KYPVCT6PCR5E2QXA4.jpg?w=150&resize=150,150&ssl=1 "The secret to making over ,000 on Facebook: you don’t need to be an influencer")
:quality(85)/cloudfront-us-east-1.images.arcpublishing.com/infobae/E7WD7Q3MN5AXTD6DLHH7VDV3UM.png?w=150&resize=150,150&ssl=1 "She’s 106, lives alone, and still works out: nutrition and wellness tips from one of the world’s oldest women")
