Foreign projects arriving in Mexico are becoming more expensive for investors from the United States, China, Japan, Germany, Switzerland, Israel and South Korea who are taking advantage of nearshoring motivated by the appreciation of the peso.

"There are already several of us who have expressed that the strength of the Mexican peso against the dollar is beginning to cause various damages to the country's real economy," declared Alejandro Gómez Tamez, general director of the Confederation of Industrial Chambers (Concamin). The businessman declared that the direct foreign investment that arrives in Mexico becomes more expensive for the international investor.

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“Imagine that building an industrial plant that costs one billion pesos, (at an) exchange rate of 20 pesos per dollar is a plant of 50 million dollars, but at the exchange rate of 17 pesos per dollar, a plant of almost 59 million dollars”, stated the economist graduated from Tec de Monterrey.

This Wednesday, June 12, the exchange rate closed at 16.8870 pesos per dollar, a level not seen since 2015, according to the Bank of Mexico. From January 2 to July 12, 2023, the exchange rate has appreciated more than 13.29%, the central bank added.

The increase in the price of exports in dollars makes them less competitive, slows their growth and generates lower profits for exporting companies, said Gómez Tamez.

He recalled that it is common practice that with a cheap dollar, importers simply buy the foreign product at a lower price in pesos, but continue to sell it at the same final price in the domestic market, thus increasing their profit margin.

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The superweight makes the construction of the factories and plants to be installed more expensive, although Mexico is extremely competitive for the T-MEC, declared Larry Rubin, president of the American Society of Mexico (Amsoc).

"The strength of the peso does reflect a stable economy, we believe that the peso as a global currency has been playing a predominant role, just like the Colombian peso," said Rubin.

The superweight is impacted by the number of companies that are considering settling in Mexico to sell to the US market: "That is the reason why they are establishing themselves and that is why nearshoring takes a predominant role."

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Original note