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Details, details…

25 October 2008

Gee, other than losing 30% of the value of my money over the last couple of weeks hasn’t been as traumatic as I thought it might be. But then, 30 percent of almost nothin’ doesn’t amount to a whole heck of a lot. And prices for essentials haven’t gone up… yet.  Right now, this is a bargain for the tourists (who aren’t freaked out by the financial upsets at home and are traveling), but — as this short article from Mercopress (Uruguay) points out — while the economic situation isn’t necessarily bleak here, there could be a serious problem coming up soon.

The Deputy governor of the Bank of Mexico (central bank) Everardo Elizondo revealed that between October 8 and 23 the bank had intervened in the market pumping 13 billion US dollars to prop the local currency.

Since last August 4, the Mexican peso has depreciated 39% against the US dollar.

Elizonod warned that the increase in the value of the US dollar in Mexico could have an impact on inflation, on real income and further pressures on the stability of the Mexican financial system.

However the president of Mexico Business Council, CCE, although praising the performance of the central bank said that the risk of inflation was contained.

“The intervention of Banxico (Bank of Mexico) to control the value of the peso against the US dollar has been adequate”, said Armando Paredes, CCE president.

“It’s essential for Mexican corporations to have US dollar liquidity”, said Paredes addressing the Mexican Foreign Trade, Investment and Technology Council.

But he warned that the exchange rate will have an impact on food “and the full cost can’t be transferred”. He forecasted that in a few weeks financial markets will begin to loose volatility and the US dollar “should stabilize in the range of 11.50 to 12.50 pesos”.

So, nothing to worry about.  Food?  Who needs food, right?

I guess we’ve all decided to overlook the role agricultural pricing policies (and lack thereof) play in the U.S. economic crisis.

2 Comments leave one →
  1. Mr. Rushing permalink
    25 October 2008 2:06 pm

    When Mexico ends Fuel subsidies, and Canada ends Medical subsides, maybe the US will end Farm subsidies. We can only hope. Subsidies are the protectionist devils that prevent free trade and competition, and frankly most farmers don’t get farm subsides in the US. A lot of times they are transferred via exchanges. Reason Magazine had found that a large ammount of farm subsidies reciepiants were brokers and financial workers in large downtown skyscraper buildings in New York City who had recieved them via exchanges and other legal means.

    The people in the US don’t really see this as an important political issue, and therefore it probobly won’t change anytime soon.

  2. 25 October 2008 8:32 pm

    Fuel subsidies were only a temporary situation, caused by passing on to consumers what was originally a higher price for gasoline during the shortage caused by the refinery shortage here. It only became a “subsidy” when U.S. prices shot up suddenly. Gas prices are set across the board by PEMEX, and are being raised incrementally over the next two years to reflect the much higher “true price.”

    New refineries are included in the energy bill (expected to pass the Chamber of Deputies next week). As a major oil producing country, once the refineries are on line, the prices will still be lower than the U.S., but not “subsidized”.

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