1996-10-17 Local Press - Peso Falls, But Still Overvalued
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Peso Falls, But Still Overvalued
The. value of the peso fell to its lowest level since December 1995 on Friday, reaching 7.75 pesos to the dollar after falling 0.65% with respect to the day before. The drop was the result of a strong demand for dollars, following a day of intense speculation, and following the slight increase in 30 year US Treasury bonds from 6.828% to 6.884% Nevertheless, economic analysts still insist that the peso is overvalued, and that Mexico is once again in a very risky situation. Although inflation has surpassed 20% so far in 1996, the peso has remained fairly steady around 7.5 to the dollar. There is reportedly tension between Finance Secretary Guillermo Ortiz and the Central flank because Ortiz wants a free floating currency, while the Bank has intervened in currency markets to ensure the stability of the peso. (La Jornada, 12 October; El Financiero 11 October).
Unspoken Costs of NAFTA
According to the Mexican Action Network of Free Trade (RMALC), one of the costs of NAFTA that the government doesn't like to talk about is the 4.2 billion pesos (about $560 million) per year that Mexico has stopped receiving in tariffs on imports from the US and Canada. According to RMALC, this is the equivalent of the federal government's budget for urban development, ecology and potable water. (La Jornada 13 October).