Appreciation of the peso is due to external factors, says the private sector

The private sector considered that in the last nine weeks, the Mexican peso has appreciated significantly; in fact, it is the first time, since March and April 1999, when the peso has managed to sustain gains for so long; however, the behavior responds to a general weakening of the dollar, given the global economic situation.

Weakening of the greenback, the main reason for the Mexican currency to appreciate.
Weakening of the greenback, the main reason for the Mexican currency to appreciate.

According to the Center for Economic Studies of the Private Sector (Ceesp), the risks continue to increase, both abroad and in the interior of the country, so it is unlikely that the economy will show an important dynamism this year and perhaps the next one, although this will depend on how the markets behave and how they will react.

He says that internally there is also an increase in risks, which at the same time increase the caution in investment. From the cancellation of the NAIM, the brake on the Energy Reform, to projects without complete studies of economic and social profitability.

The business body also stressed that expectations will adjust upward or downward depending on how these factors evolve. The Ceesp indicated that in the current situation there are risks and these are increasing, both abroad and in the interior of the country.

In fact, at the 49th edition of the World Economic Forum in Davos, Switzerland, there were coincidences regarding a deterioration of the international financial markets, which would jeopardize the good run of the Mexican currency.

And, according to Ceesp, local and international organizations have modified their economic expectations downwards, which the authorities have denied that this will happen, which shows that the authorities do not have a clear scenario of the situation and of the effects that it may generate.

"We already mentioned that the growth of Mexico depends on external and internal factors, and that depending on how they evolve, expectations will be adjusted upwards or downwards," says the weekly analysis of the business entity.

In this sense, Gabriela Siller, director of Economic-Financial Analysis of Banco Base, reiterated that the peso closed the week with an appreciation of 0.59 percent or 11.2 cents, quoting around 18.98 pesos per dollar wholesale.

Siller said that at the beginning of the week, there was a strengthening of the dollar due to the expectation of a slowdown in global economic activity; since, on the one hand, China reported that during 2018 it grew at an annual rate of 6.6 percent, the lowest rate of growth observed since 1990.

She recalled that the International Monetary Fund (IMF) adjusted downward its growth projections for the global economy, to 3.5 percent in 2019 and to 3.6 percent in 2020; figures that were below the previous estimates of 3.7 percent for both years.

However, the peso managed to close with gains because almost at the end of the week there was a general weakening of the dollar in the expectation that the US economy is slowing down due to the partial cessation of government operations, which at the end of the week turned out to be 35 days.

For this week, the market is expected to remain cautious, particularly due to geopolitical tensions.