What is the Super Peso? We asked Economists

A Mexican 50 pesos bill standing upright over a white background.

Over the last year, Mexico’s economy has been a topic of internal debate. More specifically, a single aspect of the country’s finances has dominated the minds of economists galore: the steady appreciation of the nation’s currency.

Here are the facts. After years of depreciation, the Mexican Peso has increased in value when compared to the US dollar. The increase began in mid 2020, after an exchange rate peak of 25.3 MXN per USD—mostly a result of the economic crisis brought on by the COVID pandemic. Since then, the Mexican Peso has steadily fallen to an exchange rate of roughly 16.7 MXN per USD for the first time in nearly a decade. Although, the decline only became noticeable towards the end of 2022, once the Mexican Peso had reached similar levels to its pre-pandemic value while continuing a steady decline. 

The phenomenon has become so ubiquitous in the Mexican press that it’s earned itself a catchy nickname: “Super Peso”.

USD-MXN Exchange Rate (2003-2024)

A line graph showing the exchange rate between the US dollar and Mexican Peso between 2003 and 2024
(Data from Yahoo Finance)

At Auba, we’ve been following the rise of the Super Peso for months—more so given its impact on international trade. As such, we wanted to dive deeper into the nature of this phenomenon to uncover its impact in Mexico’s economy. So, in an effort to gauge expert opinions, we decided to survey leading economists in the country about the Super Peso and what they believe its impact will be for Mexico. In the end, we spoke with 26 economists across academia, finance, and industry alike. Out of respect to them, we keep their identities private and only share an aggregate of their opinions.

The first result we uncovered was that economists are fairly split across the actual impact of the Super Peso. Although a majority of economists (38.5%) thought the Super Peso was a neutral phenomenon, it was closely followed by those who perceived it as a negative phenomenon (34.6%). Fewer economists in our sample (26.9%) saw it as a positive or extremely positive phenomenon. Interestingly, no economist perceived the Super Peso as an “extremely negative” occurrence.

In Your Opinion, the Super Peso has been…

A pie graph showing survey results of interviewing 26 Mexican economists. The graph in question shows their opinion about the Super Peso's overall effect in Mexico.
(Data from Auba Research)

Here, we asked economists to expand on their responses. In doing so, we found that, for the most part, there was a tendency to justify their views based on the impact the Super Peso could have in Mexico’s international standing. By virtue of Mexico’s currency appreciating in value, it has a double impact on Mexican commerce. On the one hand, it has a negative impact on exporters whose products are now more expensive internationally. On the other hand, it means that Mexicans can now acquire imported goods at a cheaper price. 

To better understand this, imagine there are two producers of Apples: a Mexican producer and a US producer. Both sell their products internationally at 1 USD. In 2022, with an exchange rate of 20 MXN per USD the Mexican producer would sell their Apples in the US for 1 USD, thus earning 20 MXN. The US producer, for their part, would sell their apples in Mexico for 20 MXN and make 1 USD in turn. In 2024, however, with a new exchange rate of 16.5 MXN per USD, the numbers suddenly changed. The Mexican producer, still selling at 1 USD, now makes 16.5 MXN per every apple sold—3.5 MXN less than before—, while the US producer, also selling at a dollar, now makes 16.5MXN pesos or 0.8 USD. Mexicans can now buy cheaper apples from a US producer—3.5 MXN cheaper to be precise—, but also have to sell their apples for less money.

The above is a simplification, of course, but it does carry a strong point. By virtue of the peso appreciating in value, Mexicans can import for less but most export for more. The degree of importance economists gave to each of these factors influenced their response, with many highlighting the negative impact of increased exports.

But if we found discrepancies in the impact of the Super Peso, the same was not true for its causes. The bulk of economists surveyed (75%) considered that an increase in Foreign Direct investment (FDI) to Mexico was a leading cause for Mexican currency appreciation. An additional 7.6% listed nearshoring as a cause, likely raising the perceived impact of foreign investment in Mexico’s currency to 82.6%. We also noticed that half of economists listed other financial factors as precursors to the Super Peso such as difference in Interest Rates and the State of International Markets. Political factors, such as Mexico’s current politics (19.2%), and the country’s upcoming presidential election (7.6%) played a smaller, albeit still considerable role, according to economists.

Leading Causes for the Super Peso According to Mexican Economists

A bar graph showing survey results of interviewing 26 Mexican economists. The graph in question shows the main causes they believe caused the phenomenon known as "Super Peso" in Mexico.
(Data from Auba Research)

We found a similar, albeit less meaningful agreement when it came to the likelihood that the Super Peso would collapse in the next 6 months. When asked if they believed the Mexican Peso would return to an exchange rate above 20 MXN per USD, 65.4% of economists saw the scenario as “Unlikely” or “Highly unlikely”. Roughly 23% of economists believed the opposite, while the remaining 11.5% maintained a neutral position.

How Likely is it that the Mexican Peso will Return to an Exchange Rate of 20 MXN per USD in the Next Six Months?

A pie graph showing survey results of interviewing 26 Mexican economists. The graph in question shows their opinion about the possibility that the Mexican Peso will return to an exchange rate of 20 MXN per USD in the next six months.

(Data from Auba Research)

When asked about the possibility that the Mexican Peso would settle above or below 17 MXN—a more likely scenario given current trends—we found a majority of economists (64%) saw an exchange rate above 17 MXN/USD was the most likely scenario. Only 28% of economists saw an exchange rate below 17 MXN/USD as a likely scenario. In fact, after asking economists for their specific prediction for where the Mexican Peso would settle in the next 6 months, we found an average prediction of 16.57 MXN/USD. And, interestingly, a minority of economists (8%) saw that currency devaluation or volatility were likely scenarios.

According to Your Experience, which is the Most Likely Scenario in the Next Six Months

A pie graph showing survey results of interviewing 26 Mexican economists. The graph in question shows their opinion about the the most likely scenarios regarding the Mexican Peso in the next six months
(Data from Auba Research)

Finally, we also inquired with economists as to their best guess to the duration of the Super Peso—ie, how many months they believed the Mexican Peso would continue appreciating in value. The bulk of economists agreed that the Super Peso is likely to continue for the next 5-8 months, encompassing Mexico’s upcoming presidential election and the first months of the incoming administration. Only five economists predicted the Super Peso would end in the next 1-4 months, while four economists predicted the Super Peso would last over a year.

Expected Duration of the Super Peso According to Mexican Economists

A bar graph showing survey results of interviewing 26 Mexican economists. The graph in question shows the expected duration of the phenomenon known as the "Super Peso" according to said economists.
(Data from Auba Research)

So, is the Super Peso here to stay? It is hard to say. As with all macroeconomic trends, it relies on a number of factors outside of a country’s power—be it the Fed’s interest rate or the result of the upcoming US presidential election. However, we did find some agreement across economists. In the end, our survey suggests that the Super Peso is likely to stay at least for the greater part of 2024 and, even when it is gone, it is unlikely to yield an unstable currency exchange for Mexico.

[count_views]