Is US Republican Presidential Candidate Donald Trump Responsible for Devaluation of the Peso?

is-us-republican-presidential-candidate-donald-trumpThe Mexican peso has long struggled to keep pace with the US dollar and, in fact, has been tumbling of late. Now, it has reached the historic low nearing the psychological barrier of 20 pesos to 1 US dollar. This, of course, is raising anxiety throughout the streets of Mexico: both among local businesses and the government as well.

While there are many variables at play, of course, many warn that the dramatic rise of Donald Trump in the US presidential race as part of the decline in peso value. Obviously, the Republican frontrunner’s very open and vocal commitment to building a wall along the US-Mexico border has been widely viewed as a kind of Mexico-bashing.

Indeed, Mexican President Enrique Peña Nieto explains, “There is a very clear relation with the [US] electoral process [and the decline of the peso].”

More concretely, the Mexican currency has fallen to a record low of 19.9 on the dollar, last week, hovering near the 20 mark for several days. Not that it matters, of course, since several exchange houses are already posting signs to offer a 20-peso exchange rate. While some officials are trying to downplay the devaluation, though, a handful of analysts warn that this could just be the beginning and fixing it could require extreme government intervention.

La Jornada columnisst Enrique Galvan Ochoa, for example, wrote of the issue: “It appears that the authorities in charge of the politics, economics and finances of the country are flummoxed, paralyzed by the magnitude of the devaluation. And the effects of the phenomenon could extend to the large companies of the private sector, deeply indebted in dollars.”

Peña Nieto, of course, is already facing approval ratings at a record low and he laments that perhaps a majority of Mexicans see the failing peso as a definite sign of economic crisis. However, he holds strong that they cannot focus on that. For one, he blames external factors like Trump’s claims to deport Mexicans from America as part of the increasing volatility of the Mexican currency. Economists also cite the drop in oil prices and Mexico’s generally slow growth as culprits, too.

Whatever the cause, though, the reality is that the peso has fallen 14 percent against the dollar over this year and almost 50 percent year over year.

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