A new USD/MXN Week Ahead: Is The Upside In The Mexican Peso Sustainable? has been released by the World Federation of Exporters and Importers, or WFEI. They are looking to increase the value of their Mexican products, while at the same time lowering their cost of production as well.
Many exporters from the United States, Canada and Mexico have recently decided to stop exporting to countries such as Venezuela and Russia because of the political situation in those nations. Some of these exports were made even as the U.S. economy continued to suffer from the global recession. The devaluation of the Russian ruble and Venezuela’s default on its currency has caused many exporters to reevaluate their sales policies in these two markets. While most exporters have said that they were able to obtain new financing from local banks, some have said that it has been difficult to secure these financing sources.
So if there is a change in exports to countries that have already defaulted on their currencies, does that mean the U.S. dollar will gain strength or weaken against the Mexican currency? This is what the WFEI is trying to determine with their latest report. The report includes a few charts, a short summary and analysis of why some exporters are moving into the Mexican market, and which ones aren’t.
USD/MXN Week Ahead: Is The Upside In The Mexican Peso Sustainable? looks at some of the reasons why exporters are leaving Venezuela and Russia, and why some are staying in those countries. While some exporters are citing higher levels of political uncertainty in those two nations as the reason for the increase in sales to these two nations, others are claiming that the current economic conditions are creating a positive environment for exporters to sell to Venezuela and Russia. It also appears that some exporters have decided to go ahead with their existing sales, even though their prices in the U.S. dollar are still considerably higher than their counterparts in the Mexican peso.
USD/MXN Week Ahead: Is The Upside In The Mexican Peso Sustainable? also says that the current economic conditions in Latin America, particularly in Brazil and Mexico, are favorable to exporting companies. Even though some exporters have said that the high costs of labor, transportation and other import-related costs are keeping them from opening up their sales to new customers in other nations, others have claimed that even with these additional costs in mind, the opportunities are still very great. This means that even as the U.S. dollar continues to remain weak against the Mexican dollar, some exporters may find that their sales will be unaffected by the political conditions in the two neighboring countries. They may be able to retain their current level of sales, even as other countries’ currency values remain relatively stable.
USD/MXN Week Ahead: Is The Upside In The Mexican Peso Sustainable? also indicates that a variety of factors contribute to a high degree of stability in the Mexican Peso. It seems that the exchange rate between the U.S. dollar and the Mexican Peso is based on three key factors, namely: the amount of money being sent from the U.S. Dollar to Mexico, the amount of money being imported into Mexico, and the size of shipments originating from the U.S. Dollar to Mexico.
The report also says that a high degree of stability is needed in order for exporters in the United States to continue selling goods to Latin American countries that face a great deal of economic uncertainty in the coming years. This, in turn, is critical in helping them maintain profitability in the long term.