The future is something that always terrifies people because you can never be sure as to what will happen. That is why people are always trying to make forecasts about the future of everything, from what will happen to an individual to countries’ economies and currencies. In recent times, it may be hard to find a reliable horoscope but you can predict if not the actual future of an economy or a currency but the direction in which it is heading to a surprising degree of accuracy.
Not surprisingly, the welfare of an economy has an interrelation with the welfare of its currency which is the principal mode of exchange in that economy. Similarly, the Mexican peso’s rise and fall is going to depend upon the performance of the Mexican economy. One of the biggest problems for Mexico is that it has always been over dependant on the U.S.A for most of its exports. Like all emerging economies, Mexico’s growth depends largely on its exports. According to the “world fact book CIA”, nearly 90% of all exports from Mexico goes to its two neighbors, namely Canada and U.S.A.
Another important factor that drives the economy of Mexico is the money sent home by the expatriates. According to the projections made by the financial experts of Fox news, Latino contributions from the money sent to Mexico are going to 22 billion Dollars which is an estimated increase of nearly 5% from 2010. The majority of these expatriates are living in the U.S.A. it means that any down turn in the American economy is going to affect this source of foreign exchange earnings. Essentially it means that whenever the US economy under performs it is going to have an adverse effect on the Mexican peso. With the US economy showing steady signs of recovery it is becoming increasingly evident that the Mexican peso will also stabilize.
Having said that, Mexico has come a long way; from a country that was solely dependent on its oil exports to sustain its economy, which resulted in the economic meltdown of the early 1980s. In the first half of the 1980s, more than 60% of the exports from Mexico were oil or oil products. According to the World Bank, they managed to reduce it to just around 7% of their total exports.
In order to avoid another negative year like 2009, it is necessary that Mexico should try to find other markets for its products. It especially has to concentrate on emerging economies like India and China. As it already has an edge in manufacturing high technology products according to the World Bank, it makes for nearly 20% of all exports from Mexico.
Despite, these short-term losses in recent times, the Mexican peso is the currency to look at for long-term investment. Mexico has a very stable banking sector, which maintains good liquidity. That is why so many international banks are merging with local banks. Another reason why the Mexican peso is such a good future prospect is the retirement laws of Mexico. Which has already brought in over a million people from Canada and U.S.A. it will mean that as more people come in from across the border, capitalization will continue to grow.
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