The peso and foreign exchange
Going forward, there are two main forces affecting the Mexican peso’s foreign exchange.
Mexican reforms have a big upside
The second force carries more upside than downside. The reforms have been an ongoing theme for a while, and finally, the pace of reforms seems to be picking up. If the reform pace picks up and some results become visible, the main upside is that the rating agencies may upgrade Mexico’s sovereign rating, which would justify valuation multiple expansion in the market and strengthen the currency. If the reforms don’t move as fast, the downside is more limited.
Outlook not valid for short horizons
It’s important to keep in mind that this view has a medium-to-long-term timeframe in mind. In the short term, the Mexican peso may continue to depreciate and the market may contract as well, which would not bode well for international investors. However, in the long term, these fundamental dynamics make sense.
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