IL Postcard

Get More for Your Dollar in Mexico Right Now

Date: 11/24/2008 Author: Suzan Haskins

Dear International Living Reader,

First, the dollar and now the peso. The Mexican peso has steadily weakened over the past months, thanks to worries that a deepening economic crisis in the U.S. could push Mexico into recession.

In recent weeks the peso has sunk to its lowest rates since 1994, after which Mexico's government cut three zeros off the end of peso denominations to create a “new peso” worth 1,000 old pesos.

Put more understandably, the peso has traded at roughly 10 to one U.S. dollar for the last five years or so--most of the time we’ve been living in Mexico. Just looking at this year, on August 5, the exchange rate was 9.9 pesos to the dollar. Just two months later (Oct. 5) the rate rose to 11.2 pesos to the dollar…and today, it is at 13.5 pesos to the dollar.

To those of us who live here, we see little effect of this on the surface of things. Prices remain by and large the same, even though the situation has forced one of our favorite retail chains, Comercial Mexicana, into bankruptcy proceedings. (To conserve on operating costs, stores are now operating with dimmed lights. It’s twilight shopping time all the time.)

Underneath the surface, Mexicans are as worried about their economy as we are about ours. Mexicans working abroad are sending less remittances to families in the country, and prices have fallen for oil, Mexico’s top export. Tourism from the U.S. is down, too, thanks to the sagging economy there.

No one likes to see others suffer, but if there is a silver lining to all this, it’s fallen into the laps of those of us who live here on income derived from our foreign-denominated currencies.

In fact, our U.S. dollar now goes 20% further in Mexico than it did just a few years ago. To give you an example, we recently went to look at a headboard for our bed. Its cost is 6,400 pesos. Just a couple of months ago, with the exchange rate at 10.5 pesos to the dollar, it would have cost us about $610. Today, with the exchange rate at 13.5, it would cost us $474.

As you might imagine, some expats who live here are taking advantage of the weakened peso to buy larger goods and appliances they’ve been putting off until now. They’re getting a price break and stimulating the economy at the same time.

Where the currency exchange really makes a difference, of course, is on property prices. A few months ago, we were considering buying a small home here in Merida to renovate and use for rental income. The Mexican owners wanted us to lock in the price at 520,000 pesos, which converted to about $50,000 then. This was at a time when the dollar was weakening against just about every currency in the world. Being afraid the dollar would continue to slide, we decided not to move forward with the transaction. If we had accepted their terms, though, and if the closing had taken place last week, the house would have cost us $40,000. That’s a pretty substantial savings.

By the way, if you’re thinking of a holiday trip to Mexico, now’s the time. Hotels are offering special discounts and because of the favorable exchange rate, restaurant and other costs are very reasonable.

Suzan Haskins
Your Latin America Insider, International Living

Editor’s Note: Want to know how to start a new life in Mexico in as little as six months…and on a budget of $2,135 (or less) per month; how to save thousands of dollars through Mexico's government-sponsored health insurance program; find a bargain dream home; renovate your home; shop for cars; appliances, and groceries…plus everything else you need to know to live or invest in Mexico? Suzan will tell you how, here