Political Risk Latin America Blog @PolRiskLatam

Mexico: don’t leave us out of the currency war

Posted in News and Articles, Political Risk by politicalrisklatam on October 26, 2010

by Adam Thompson for Financial Times – Beyond Brics, October 25th, 2010.

Is the Mexican peso overvalued? Guillermo Ortiz, Mexico’s former central bank governor thinks so. While most people in Mexico were using their Sunday to unwind, Ortiz was telling an audience in Toluca, just outside the capital, that the ease of investing in Mexico was increasing the risk of an overvalued currency.

Ortiz’s warnings come as emerging markets are seeking to protect their currencies from the effects of large influxes of foreign capital. Brazil has said that it will increase a tax on foreigners investing in fixed-income securities from 4 per cent to 6 per cent. Thailand recently said that it is considering measures to reduce currency volatility.

And Mexico, Ortiz seems to believe, should probably be doing something similar. “We shouldn’t be the ones left out,” he said. The peso has already increased more than 7 per cent against the US dollar by since the start of September, and there is a fear that a continuing rise could have a negative impact on exports. (continue reading… )

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