Why A Weaker Peso is Good for the Mexican Economy

Every now and then, the Mexican peso takes a dip, and the headlines are quick to scream “crisis.” On the other hand foreigners living in Mexico scream “We’re Back”
The group that is relatively unheard or the Mexicans and Mexican Americans that are also happy when the peso weakens. Key word - Weakens, not is weak. Here's the thing: a weaker peso doesn’t necessarily mean Mexico is on the brink of economic doom. In fact, there’s a good argument that it might actually be an economic weapon for Mexico if managed correctly.

A weaker peso opens up growth opportunities, not just by making tequila and tacos cheaper for tourists, but by boosting Mexican exports, driving up foreign investment, and even strengthening certain domestic industries. The key is to avoid getting swept away by the fearmongering and instead look at the data, recent events, and, real-world examples of how a weaker peso has actually benefited Mexico in the past and could do so again today.

Here is a lengthy argument including sources and example breaking down why a lower peso can be a pretty good deal—and maybe even a winning strategy for Mexico.

• Export Growth

• Tourism Boom

• Foreign Investment

• Remittances

• Domestic Manufacturing

• Real Estate and Rental Market

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1. Export Growth: Mexico's Manufacturing

The biggest way a weaker peso helps: exports.
If you've ever looked at Mexican society, you'd know that exports are the lifeblood of this economy. From automobiles to electronics, Mexico produces and ships out a ton of stuff. Now, when the peso weakens, the dollar (and other foreign currencies) suddenly stretches further in Mexico, which makes those exports cheaper.

Mexico overtakes China as the leading source of goods imported by US
”Figures released Wednesday by the U.S. Commerce Department show that the value of goods imported by the United States from Mexico rose nearly 5% from 2022 to 2023, to more than $475 billion. At the same time, the value of Chinese imports tumbled 20% to $427 billion.”

Exports of selected types of consumer electronics from Mexico in 2022

Case in Point: USMCA and the Mexican Auto Industry

Take the auto industry, for example. Mexico is one of the top car manufacturers in the world, and a significant portion of its production is exported to the U.S. and Canada under the United States-Mexico-Canada Agreement (USMCA).

Mexico is the world's seventh-largest passenger vehicle manufacturer, producing 3.5 million vehicles annually. Eighty-eight percent of vehicles produced in Mexico are exported, with 76 percent destined for the United States.

When the peso weakens, these cars become more affordable for American buyers, making Mexican-made vehicles an even better value. In 2020, during the pandemic, we saw the peso take a hit, dropping to around 25 pesos to the dollar. Instead of sinking, the auto industry ramped up exports to meet increased demand in the U.S., which was recovering faster than most economies. That weaker peso gave Mexico a price advantage, helping it recover faster in a challenging global economy.

So, while a weaker peso might mean locals pay a little more for imported goods, it’s a win for anyone involved in export-heavy industries. It helps drive up demand, increase production, and create jobs—especially in states like Guanajuato and Coahuila, where auto manufacturing is king. Considering that Mexico is large enough and resourceful enough to make most of its own good, import cost haven’t been a significant problem