Ay, caramba — Peso Collapses

It looks like Mexico sourcing may soon become a lot more attractive. According to this recent Bloomberg dispatch the Mexican peso just had its single largest intraday drop since the devaluation almost 15 years ago in the past 24 hours. Specifically, “Mexico's peso tumbled as much as 13.8 percent, its biggest intraday drop since a government devaluation in 1994, amid concern that a coordinated rate cut by central banks won't be enough to unfreeze credit markets.” Granted, it would be foolish to plan long term sourcing strategies on short-term currency fluctuations, but if the current 12.5 trading range holds, the Peso will stay at an exchange rate we’ve not seen for over five years. By my calculations, Mexico should be roughly 15-20% cheaper than it was compared with prices from one year ago. Ay, caramba for Mexican bankers, but is it an opportunity for the rest of us (not to mention the Mexican export market)? Si!

- Jason Busch

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