After last week's largest annual drop for the Mexican peso versus the U.S. dollar since 2008, what does this mean for growers and importers of produce? "As of the turn of the year, we are seeing rates of $20.60 MXN peso/$1 USD to the dollar right now. In the last four years, we were seeing rates as low as $15-16 MXN pesos/$1 USD which increased our cost of goods," says Primo Trading's Tony Martinez. "The strengthening of the US dollar vs the MXN peso is a huge sigh of relief since it opens up buying power for all importers. Overall it's impacting any commodity that's being traded. If it's being paid in pesos, it's going to lower the cost of goods because of the exchange."
Martinez says the strengthening of the US dollar vs the MXN peso is a huge sigh of relief since it opens up buying power for all importers.
More investment possible
A more favorable rate of exchange (FX) helps importers drop the cost of goods and increase their margin. Also for importers who help finance crops "a better exchange rate drops our cost on items such as land leases, seed, chemicals/fertilizers or just cash injections," says Martinez.
While there are some reports that the peso's depreciation will continue in the coming months, there are events ahead that are likely to impact the peso's relationship to the dollar. "Once the inauguration of President-elect Trump happens, it could continue to go that way depending on what approach is taken towards the tariffs against other countries, the approach towards the Panama Canal, etc.," says Martinez. "How the new administration will handle those items is of concern to many so we will continue to monitor as the coming days unfold."
For more information:
Tony Martinez
Primo Trading Services LLC
Tel: +1 (956) 800-4343
[email protected]
https://www.primotradingservices.com/