Mexican peso to suffer more

Economic and socio-political conditions of Mexico says that trouble for Peso is not over.

Economy at a glance -

• GDP is growing at annual rate of 2.6% still but growth has slowed from 4.5% in 2012. Growth remain subdued since 2013 but showing some signs of revival recently.
• Unemployment rate after falling below 4%, went up again to 4.5% in recent times.
• Core inflation has slowed below 3%.
• Mexico since 2008 is running budgetary deficit and it has gone up to 4% in recent time.
• Government debt is small just 36% of GDP but companies have gobbled dollar denominated debt for which service cost has gone up significantly with a fall in currency and rise of interest rate for dollar debt.
• With a fall in oil price, trade balance has deteriorated to 2008 level.

Socio politics -

• Recent survey shows that Mexico suffers with several problem, most severe is corruption according to participants.
• Second most important issue is lack of security followed by unemployment and violence.

Recent action -

• Central bank announced dollar sell worth $ 52 million per day for three months to prevent the currency from decline.
• Peso is down by 17% in last 12 months and 5% YTD against dollar.
• The currency is trading at 15.40 against dollar, down after action by central bank. However it may not be enough to pop up the currency against dollar until reforms are taken up to boost investor confidence.