Following the bouncing exchange rates
For many Americans in San Miguel tracking the exchange rate of the Mexican peso vs. the U.S. dollar is a pastime with potential payoffs as well as guilty feelings.
When the dollar goes up, or the peso down, expats whisper excitedly to one another about running to the bank to exchange a bundle of dollars and take advantage of a mini windfall. In fact if the exchange rate goes from 12 to 14 pesos to the dollar, our cost of living as reflected by the greater buying power of the dollar, theoretically increases by nearly 17 percent.
When we were building our house, the value of the peso kept dropping during the nine months of construction, which we figured reduced the cost of the project by a significant amount.
There were also some favorable (for us) turns in the exchange from the time we put a down payment on the land to the actual closing six months later, that we figured saved us about $3,000US. In this case, the deal was denominated in dollars which had gone down in value.
But Don Lucas, the 85-year-old rancher who sold us the land, was a cagey sort whose abilities to make a buck have not been at all eroded by age. I suspect he sensed he had somehow been screwed out of some pesos and later refused to repave the right-of-way to our property, as promised in the sales agreement. That cost us nearly $5,000US.
Then again, Lucas has a well established reputation for trying to shaft everyone he comes in contact with--Mexican or American--whether he's selling a piece of land or a burro. For him, it's just a way of doing business.
Point is that whatever we "saved" in the buying of the land pretty much was eaten up by the unexpected expense of paving half a kilometer of road.
Exactly what propels the dollar or the peso up or down is a mystery to me.
From where we stand, the American economy looks dim and prospects of an early recovery even dimmer given the political impasse in Washington, which could be described as, ahem, a "Mexican standoff."
Meanwhile, the Mexican economy grew by 5.5 percent last year and is expected to go up about 4 percent in 2011. At the moment Mexico's is the 11th largest economy in the world, according to the World Bank.
Visit the neighboring state of Querétaro and there is so much housing, road and factory construction you can almost hear a mariachi version of "Happy Days Are Here Again" playing in the air.
So why is the exchange rate almost 14:1 now compared to 10:1 in 2008? Why is the peso going down and/or the dollar up?
I dunno.
How a favorable exchange rate benefits Americans is also hard to figure out. Bananas and onions at the produce market suddenly become cheaper, a boon to foreigners and certainly a bust to Mexican vendors whose currency and merchandise suddenly is worth less.
But not quite. Large Mexican enterprises--the telephone company and retailers like supermarkets and Costco--have the sneaky habit of raising prices when the dollar goes up, supposedly to compensate for higher import costs.
Our monthly internet fee with the telephone company went from around $599 pesos in June to $698 this month--with no explanation or warning from Carlos Slim, the owner of the phone company and the first, second or third richest man in the world depending on how the Dow Jones market is doing.
In his defense, Carlos might argue that increased costs for imported equipment or whatever justify the 16.5 percent price hike, which neatly follows the approximate fall in the value of the peso since June. Except his labor and other local costs didn't go up that much.
No point in calling TelCel, the company that sells the wireless internet gizmo that we use, to demand an explanation. Whomever you get on the line won't have an explanation or share it with you if they do.
At the end of the afternoon, though, it's the rank-and-file Mexicans who get the worst deal. The costs of many sundries go up but their income generally doesn't. And once large companies or retailers raise peso prices they are not likely to reduce them later to account for currency fluctuations.
Americans in San Miguel, some of whom never cease searching for things to feel guilty about vis-a-vis Mexicans, will somberly lament the impact of the falling peso on poor people.
A few years ago we gave our maid a raise to make up for the shrinking peso which had gone from 11:1 down to 13:1 between 2006 and 2009. Of course, the peso subsequently went up and RocÃo got herself a deal, ending up earning about $5US an hour which is a very handsome pay for a maid. So we don't do that anymore.
Soriana, one of two large supermarkets in town, recently installed digital price labels on its shelves complete with a sensor, a system which presumably allows easier changes in prices. It's hard to tell if the prices are changing up or down. I'd bet on up.
As I write this Stew is on a shopping blitzkrieg at the Costco in Querétaro, another instant bellwether of rising prices on account of changing exchange rates. I'm betting on increases there too.
So much for any windfall from the rising value of the dollar.
When the dollar goes up, or the peso down, expats whisper excitedly to one another about running to the bank to exchange a bundle of dollars and take advantage of a mini windfall. In fact if the exchange rate goes from 12 to 14 pesos to the dollar, our cost of living as reflected by the greater buying power of the dollar, theoretically increases by nearly 17 percent.
When we were building our house, the value of the peso kept dropping during the nine months of construction, which we figured reduced the cost of the project by a significant amount.
There were also some favorable (for us) turns in the exchange from the time we put a down payment on the land to the actual closing six months later, that we figured saved us about $3,000US. In this case, the deal was denominated in dollars which had gone down in value.
But Don Lucas, the 85-year-old rancher who sold us the land, was a cagey sort whose abilities to make a buck have not been at all eroded by age. I suspect he sensed he had somehow been screwed out of some pesos and later refused to repave the right-of-way to our property, as promised in the sales agreement. That cost us nearly $5,000US.
Then again, Lucas has a well established reputation for trying to shaft everyone he comes in contact with--Mexican or American--whether he's selling a piece of land or a burro. For him, it's just a way of doing business.
Point is that whatever we "saved" in the buying of the land pretty much was eaten up by the unexpected expense of paving half a kilometer of road.
Exactly what propels the dollar or the peso up or down is a mystery to me.
From where we stand, the American economy looks dim and prospects of an early recovery even dimmer given the political impasse in Washington, which could be described as, ahem, a "Mexican standoff."
Meanwhile, the Mexican economy grew by 5.5 percent last year and is expected to go up about 4 percent in 2011. At the moment Mexico's is the 11th largest economy in the world, according to the World Bank.
Visit the neighboring state of Querétaro and there is so much housing, road and factory construction you can almost hear a mariachi version of "Happy Days Are Here Again" playing in the air.
So why is the exchange rate almost 14:1 now compared to 10:1 in 2008? Why is the peso going down and/or the dollar up?
I dunno.
How a favorable exchange rate benefits Americans is also hard to figure out. Bananas and onions at the produce market suddenly become cheaper, a boon to foreigners and certainly a bust to Mexican vendors whose currency and merchandise suddenly is worth less.
But not quite. Large Mexican enterprises--the telephone company and retailers like supermarkets and Costco--have the sneaky habit of raising prices when the dollar goes up, supposedly to compensate for higher import costs.
Our monthly internet fee with the telephone company went from around $599 pesos in June to $698 this month--with no explanation or warning from Carlos Slim, the owner of the phone company and the first, second or third richest man in the world depending on how the Dow Jones market is doing.
In his defense, Carlos might argue that increased costs for imported equipment or whatever justify the 16.5 percent price hike, which neatly follows the approximate fall in the value of the peso since June. Except his labor and other local costs didn't go up that much.
No point in calling TelCel, the company that sells the wireless internet gizmo that we use, to demand an explanation. Whomever you get on the line won't have an explanation or share it with you if they do.
At the end of the afternoon, though, it's the rank-and-file Mexicans who get the worst deal. The costs of many sundries go up but their income generally doesn't. And once large companies or retailers raise peso prices they are not likely to reduce them later to account for currency fluctuations.
Americans in San Miguel, some of whom never cease searching for things to feel guilty about vis-a-vis Mexicans, will somberly lament the impact of the falling peso on poor people.
A few years ago we gave our maid a raise to make up for the shrinking peso which had gone from 11:1 down to 13:1 between 2006 and 2009. Of course, the peso subsequently went up and RocÃo got herself a deal, ending up earning about $5US an hour which is a very handsome pay for a maid. So we don't do that anymore.
Soriana, one of two large supermarkets in town, recently installed digital price labels on its shelves complete with a sensor, a system which presumably allows easier changes in prices. It's hard to tell if the prices are changing up or down. I'd bet on up.
As I write this Stew is on a shopping blitzkrieg at the Costco in Querétaro, another instant bellwether of rising prices on account of changing exchange rates. I'm betting on increases there too.
So much for any windfall from the rising value of the dollar.
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