President Andres Manuel Lopez Obrador boasted that Mexico “passed the test” in withstanding the August 5 global market meltdown thanks to this country’s “strong economy.”
Specifically, he pinpointed the country’s “manageable debt” and high international reserves as important factors contributing to this resilience.
Lopez Obrador brushed off concerns about a weakened peso following the market readjustment, noting that he is the only leader in recent times who has not presided over significant devaluations.
At one point on August 5, the exchange rate fell by 4.4 percent, with the peso trading at over 20 pesos to the dollar, a rate not seen since October 2022. Since then, the Mexican currency has bounced back, and was trading at 18.86 pesos to the dollar on August 8.
Investors worldwide were thrown into panic on August 5 due to fears of a weakening U.S. economy, and concerns of a coming recession. The Dow Jones Industrial Average dropped by 1,000 points before recovering slightly.
Despite rising prices (see story right), Lopez Obrador has good reason to brag about the resilience of the Mexican economy.
In 2023, Mexico registered its second consecutive year of growth exceeding three percent, and the central bank’s international reserves, which guarantee liquidity in dollars to respond to external shocks, totaled $US216.903 billion as of March 22 of this year—the highest balance since records began in 1996. In addition, foreign investment has been on an upward curve since the Covid pandemic, boosted by Pacific Rim companies looking for nearshoring opportunities.
Perhaps most dear to AMLO’s heart is the data on Mexico’s poverty rate, which fell from 43.9 percent in 2020 to 36.3 percent in 2022.