Mexico's Peso Crash a Crush for the Metals Industry?

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The answer to that question depends upon whom you ask. With the peso crashing because of declining oil revenues, and a grim economic outlook, the Mexican government finds itself in a somewhat familiar situation as it did in 1994-1995 during the “Tequila Crisis” back when the peso last collapsed. Ironically, it is Mexico that the US has turned to for guidance on handling the current economic crisis as reported in the Wall Street Journal. But the currency collapse of course makes imports into Mexico more expensive and Mexican exports more competitive.

Many of the Latin American economies have not diversified much beyond exporting commodities, according to this AP article. In a boom time for commodities markets, many Latin American countries reaped the benefits of high prices and saved their “pesos” in reserve funds. Those reserve funds are being used today to shore up confidence and boost currencies. But from a sourcing perspective, Mexico should appear more competitive to US buyers for products such as forgings, castings and machined parts, unless of course the raw material portion of the product does not contain much labor, as a percentage of the overall product value.

Here is what German Dominguez, a MetalMiner associate had to say on the subject:

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