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Podcast: Separating Fact from Fiction – Why the Peso Devaluation is a Competitive Advantage for Mexican Manufacturing
Economists and small manufacturers alike are taking a wait-and-see approach to the new Trump administration. For Mexico, the continued devaluation of the peso raises additional questions. In this podcast we sat down with economist and author Joe Atikian who takes the time to separate fact from fiction when it comes to the declining peso’s effect on the Mexican and US economies and how devaluation could affect Mexico manufacturing operating costs.
“The peso devaluation has increased Mexico’s competitive advantage, and I think the long-term decline of the peso…gives confidence to firms that want to move to Mexico.” – Joe Atikian, Economist and Author
As Atikian reveals, one of the major factors affecting the value of the peso is the price of oil. “The correlation between rising oil prices and a rising peso is very strong. So when oil goes up, the peso goes up. Oil goes down, the peso goes down. And that relationship is very, very tight. So it does look like the recent plunge in oil, after the Great Recession, I think that had a big effect on the weakening peso.”
Atikian, author of “Industrial Shift: The Structure of the New World Economy,” explores the following:
- The three most important aspects of the peso devaluation that manufactures should consider: investments, purchasing decisions and recurring transactions.
- Howoperating costs in Mexico could change over time.
- The issues behind Mexico’s peso devaluation, including the low price of oil and the relative strength of the US economy.
- Why popular perceptions of weak currencies aren’t always on the mark.
- Whether Mexico has an advantage over other currencies, such as the yen, among cost-competitive manufacturing locations?