It is said that when the United States sneezes Mexico catches a cold, which gives an example of the impact one country’s events have on the other. In this election, you could say that if the Trump virus wins this side of the border, the other side will catch pneumonia.
The best barometer to gauge the effect of a win by the Republican can be seen in the relationship between the dollar and the peso. Yesterday, the U.S. Currency reached 19.08 Mexican pesos. As the dollar loses value, México’s economy and its people are being impoverished as their wages lose purchasing power.
There are many reasons why the Mexican peso may lose value, besides the result of the U.S. presidential election. They include the fall of oil prices, a rise of interest rates in the U.S., a downgrade of the Mexican debt, or the weakening of other currencies in emerging economies.
However, in this case the Trump effect is the one that seems to have the most influence, because the candidate has turned México into his favorite scapegoat to explain the U.S.’ Economic woes.
The millionaire thinks that the lack of jobs here is directly related to the American industry’s decision to move its production plants to Mexico under the auspices of the North American Free Trade Agreement (NAFTA). Trump also claims that undocumented immigrants are taking jobs from American workers.
The possibility of an interruption or a renegotiation of the trade agreement creates a somber perspective for the Mexican economy, as well as a border policy that would block the movement of Mexican goods toward the U.S.
A Reuters poll of currency strategists found that the Mexican peso could plunge at least 10% against the dollar if Trump is elected president.
The Mexican economy is already under pressure because of low GDP expectations and a rising inflation. The good side of the peso fall is that it would be a boon for immigrants, as their remittances would increase in value.
A possible Trump victory, whose likelihood has increased due to the doubts over Clinton raised by the emails fracas, is already creating a worrying uncertainty in México whose impact can already be felt. We will have to wait until Tuesday.