The Mexican peso (MXN) is considered to be an exotic currency in the Forex market. Mexico is the world’s eleventh largest economy(CIA.gov).
Trade Surplus or a Trade Deficit?
Mexico runs a trade deficit of $7 billion, giving the country a ranking of 173 out of the 190 countries tracked by the CIA in The World Factbook(CIA.gov).
What Does Your Economy Export?
Mexico exports manufactured goods, oil and oil products, silver, fruits, vegetables, coffee, and cotton.
According to the World Trade Organization (WTO),18 Mexico exports $229.6 billion in goods and merchandise compared to only $15.4 billion in commercial services. The WTO breaks down those exports as follows:
Goods and Merchandise
- Agricultural products: 6.8 percent
- Fuels and mining products: 15.8 percent
- Manufactures: 75.1 percent
Commercial Services
- Transportation: 10.5 percent
- Travel: 73.1 percent
- Other commercial services: 16.4 percent
To Whom Does Your Economy Export?
The WTO ranks the following countries as the top destinations for exports from Mexico:
- United States: 80.7 percent
- European Union: 5.1 percent
- Canada: 3.6 percent
- Colombia: 1.1 percent
- Brazil: 1.1 percent
What Does Your Economy Import?
Mexico imports metalworking machines, steel-mill products, agricultural machinery, electrical equipment, car parts for assembly, repair parts for motor vehicles, aircraft, and aircraft parts.
According to the WTO, the country imports $241.5 billion in goods and merchandise compared to only $21 billion in commercial services. The WTO breaks down those imports as follows:
Goods and Merchandise
- Agricultural products: 8.6 percent
- Fuels and mining products: 9.0 percent
- Manufactures: 80.4 percent
Commercial Services
- Transportation: 13.6 percent
- Travel: 33.9 percent
- Other commercial services: 52.5 percent
From Whom Does Your Economy Import?
The WTO ranks the following countries as the top sources of imports to Mexico:
- United States: 48.1 percent
- China: 13.9 percent
- European Union: 11.6 percent
- Japan: 4.9 percent
- South Korea: 4.7 percent
Do You Have an Attractive Government Debt Market?
Mexico currently has a Moody’s rating of A1. It received this latest rating on May 24, 2006. This most recent rating was an upgrade from the Baal rating that the country had held previously. This is a positive sign for the country’s government debt market(moodys.com).
Do You Have an Attractive Equities Market?
Mexico has an attractive equities market, but it is not very large. It is the twenty-fifth largest equities market in the world, with a total market value of $340.6 billion(CIA.gov).
Central Bank Mandate
The monetary policy of the Banco de Mexico is to influence interest rates and inflation expectations in order to make price behavior consistent with the objective of ensuring an environment of low and stable inflation. This is how the Banco de Mexico contributes to establishing appropriate conditions for sustained economic growth and the creation of permanent jobs(www.banxico.org.mx).
The Banco de Mexico has foreign currency reserves of $112,033 million and gold deposits of $326 million(www.imf.org).
Government Intervention in Forex
The Mexican government has been known to intervene in the currency market from time to time.
Important Economic Announcements
When you are watching the economic announcements coming out of Mexico, make sure that you keep your eye on the following:
- Interest rates
- Employment
- Inflation
- Gross domestic product (GDP)
- Trade balance
Are You a Safe-Haven Currency?
No, the Mexican peso is not considered to be a safe-haven currency.
How Can I Trade You?
You can trade the Mexican peso using any of the following:
- Spot Forex
- Forex futures
- Exchange-traded funds (ETFs)
- Spot Forex options
- Exchange-traded Forex options
