Weekly Currency Update: Mexican Peso

Today the Mexican Peso is trading at $12.62 MXN = $1 USD.

According to Bloomberg, the Mexican Peso saw its fourth consecutive week of gains, which is the longest streak since March. 

The opposition party (PRI) is proposing a bill that would cut the value added tax (IVA in Spanish) which is currently at 16%.  President Calderon had approved the increase from 15% to 16% at the beginning of this year, but the PRI is pushing hard for a reversal of this increase.  Many experts suggest that such a move would mean confusion and suggest a weaker Mexican economy. 

Doing Business in Mexico: Opening a Mexican Bank Account

When you set up a business anywhere, one of the first tasks to take care of is to set up a bank account.  Mexico has a number of banks that offer small and medium businesses checking and savings accounts, some in Pesos and some in Dollars (NOTE:  in order to open a dollar account, you have to be a certain number of kilometers from the US-Mexico border).



The requirements vary from bank to bank but here are the minimum standard requirements that you will need to open a business bank account:

• Acta constitutiva (articles of incorporation)
• Official ID (if you are a foreigner, your passport)
• FM-2 or FM-3 visa (your work or investor's visa)
• If you are not the legal representative for your company, you must have a document that testifies you can sign on behalf of the company
• Comprobante de domicilio (proof of address - must be recent, within the last month, Telmex or CFE)
• Minimum deposit (these range from bank to bank...the least I've seen is $6,000 MXN at Bancomer)
• Copy of your RFC
• Business and/or personal references

Remember to check each bank's requirements.  Bring extra copies of everything!

Weekly Currency Update: Peso

Today the Mexican Peso is trading at $12.77 MXN = $1 USD.  This has been the worst month since February 2010 for the peso.   
The events that have affected the peso's value this week include:

• Weaker than expected US economic data (as they say, when the US gets a cold, Mexico gets pneumonia!)
• The report that China is reviewing its Euro bond holdings
• The European debt crisis

In a related note, Hacienda (Mexico's IRS) has placed a restriction on dollar cash deposits in Mexico.  This has created a parallel black market for dollars, which can pose a huge threat to the economy.  The restriction was put in place in an effort to curb money laundering.
 

Unemployment in Mexico remains low despite financial woes

If you look at the recent unemployment rates of countries around the world during this financial crisis, something stands out.  Mexico, despite all its ups and downs, has a surprisingly low unemployment rate of 4.9% (tied with Austria!!). 

Unemployment rates around the world:

1. South Korea - 3.8%
2. Netherlands - 4.1%
3. Austria - 4.9%
3. Mexico - 4.9%

Which country had the highest levels of unemployment?  Spain at 19.1%.

The main reason that Mexico has such a low unemployment rate is because of the informal economy.  Nearly 28.6% of the Mexican population is working in the informal market.  This means no benefits, no government intervention, and no taxes.

Outlook for Mexican Economy in 2010

According to the Mexican economists, Mexico's economy is slated to see 5% growth in 2010.

The Mexican economy contracted 6.5% last year due to several events:

-Swine Flu (H1N1 flu) cost the country

-Exports to the US were down significantly, due to the financial meltdown in the US

-The peso was very volatile and at one point reached $15.38 MXN = $1 USD

At the end of 2009, economists were only predicting a 3% increase in the economy.  Why the sudden increase?

-One of Mexico's main exports, automobiles, rose 85% in March

-290,000 jobs were added in the first quarter of 2010, according to President Calderon

-The peso has stabilized somewhat and is now around $12.17 MXN = $1 USD

Despite the positive signs, consumer confidence and foreign investment are still lagging.  Consumers are being very careful with where they spend their money.  Mexico is still very dependent on what is happening in the US economy, so the sooner we see signs of improvement in the US, the sooner it will trickle down to Mexico.