View Full Version : Mexican Peso History: Anybody know it?

05-16-2002, 09:03 AM
In the parts of Mexico I visit - meaning the both coasts and tourist spots but not Mexico City or Jalisco - there are these foundations and unfinished structures everywhere you look. Why?

Seems I remember the Mexican Peso getting wrecked somtime in the early 1980's. Do these foundations date from that period? From what period do these foundations date?

I have noticed, when you drive up rural canyons outside urban areas in the US, the period of the architecture is almost like tidal marks, reaching a certain amount up the valley during a certain boom. Do these periods in our country coincide with the foundations in Mexico?

Can anybody, without offering any economic theory, offer a compact history of Peso/Dollar rates, Mexican forms of government, or whatever might be relevant?

Who the heck built those foundations!?!



05-16-2002, 03:49 PM
Not always the case. Foundations can sometimes exist simply to almost claim the land. There are still vestiges of the old squatter rules and putting something on your land prevents that in some ways. The last peso crisis was in 1995 and may have slightly contributed to some of what you see, but its been so long and prosperity has been such recently that I doubt its the reasoning. When you see a structure like that it often can mean that some business made a deal with a builder to get something built and then backed out or ran out of money. Its tough to get loans for buildings in Mexico because the foreclosure rules are terribly skewed to the debtor. It can take 3 years to get a property foreclosed even if the debtor goes into court and admits not paying. So construction is mostly funded through free cash flows and if they dry up you get a building just like you saw.

The history of the peso? Well two big shocks come to mind really. The first peso was worth about 4-5 to the dollar in the early 80s. Remember Mexico is heavily dependent on oil, not because there is that much of it, but because it all is government property and sales of it become a major part of the governments revenues. In the late 70s and early 80s Mexico was rich because of it, oil was high and the economy was well protected from any international forces. The world's banks loaned money lavishly to Mexico because they were so flush with oil money. Well the oil price collapse of the mid 80s wiped them out. They had no way to pay off these loans so they did what every country used to do and that is to get the printing presses running. In about 10 years the peso went from 5-1 to about 4000-1. It was like Italy, things were priced in the millions and people didn't want anything but dollars if they could get them. Finally the government had enough and did the in vogue thing, declared a new currency with new policies that would limit the printing presses. The "new" peso was basically the old peso minus 3 zeros. One thousand old pesos became 10 new pesos. The plan worked fairly well, there was a slow devaluation band that factored in the higher inflation of Mexico and also obliged the common people in their still strong desire to hold dollars. Mexico at this time was still fairly closed economy but was slowly opening up and it was exposing their currency. However, every government to keep up their election chances, kept the peso fairly steady and it would build imbalances. Once the new president made it into office one of the first orders of business was to devalue the peso in an orderly and expected way. This always caused a short term crisis, what Mexicans always came to expect when a new office began. Well in 1994 it was no different except NAFTA and further openings in the market made them much more exposed. Pesos were still controlled, but the economy in a global sense wasn't. Disaster struck as Zedillo did the usual and devalued. Problem was that the markets weren't having it at his modest devaluation. They began a flat out run on the peso. Mexican inflation and interest rate differentials were running really high in 1994 because that was the time of a run-up in US interest rates and also a time where more and more foreign products were being sold in Mexico. The Salinas goverment refused to devalue and the Zedillo government paid for it hard. The peso went from about 4-1 to 7.5-1 in a matter of days. The Zedillo goverment saw this because they had almost no currency reserves and were forced to free float the peso. No more controls and everyone ran to the dollar. If the country's economy was still closed it wouldn't have been a disaster, but with such a newfound dependence on foreign goods and direct investment, this was a huge negative shock, one that the population spent 5 years or so overcoming. At the time there were interest rates over 100% and even at that banks wouldn't loan much money. There still are lingering problems in the banking industry to this day from the 95 crash, basically the banks won't loan to small businesses, put up mortgage loans, and up until last year charged variable rates at outrageous levels on credit cards. Its a good lesson for anyone to study because there are some doomsday scenarios that are very similar for the US should our currency have the bottom fall out of it. It would be hard to do, short of a bond default fortunately. Free-floating currencies are the key to keeping it from being a disaster. Now things have changed. Fox's election was the first time in decades a president started out on good economic footing without a peso devaluation. The peso has actually appreciated because of supply and demand with Mexico being among the biggest investment spots in the developing world. These inflows are finishing off a lot of those buildings, many times just buying the land and tearing down what foundations there are.

I own a house in the city of Veracruz, very close to a block where there were the frames of houses. One of my neighbors told me they did it to avoid the squatter situation with the intention of moving in once they retired. They ended up selling the land and its frames and a rich local businessman build a house the size of a whole city block, turned it into a fortress with walls so high you can't see in. So don't always expect those abandoned foundations to come out the way they appear. Architecture and zoning just don't really exist in any uniformity in Mexico. You can build a business anywhere you have land and you can make your buildings look completely different than your neighbors in all but a few historical cities.

05-16-2002, 04:35 PM

05-16-2002, 11:38 PM
Post this somewhere else!

I see no stock market relevance here.

05-16-2002, 11:51 PM

05-17-2002, 03:25 AM
Maybe this isn't directly related to stocks like a technical buy signal, but you know there are important things to learning about investing in foreign countries in learning their history. People don't day-trade the Mexican market much, they trade it on fundamentals and understanding what relationships events have on stock prices and good investment possibilities. I tell the story because there are plenty of great investments to be had in Mexico. I gave one out a couple weeks ago (EKT), it was at 9.02 and its around 11.30 now. Is that a good enough reason to explain the history of the peso and industry because that understanding gave me this very nice winner. Understanding how things work in a foreign country is different than finding momentum signals. What you or Leroy trade on here in the US aren't going to work too well in most other markets. But if you prefer us all to just be blind idiots and have me not give any insight that may lead to winning investments in the future, why don't you just say that then??? If that is the case we will start just bowing to you when you say "this is it, the big run-up is here" with no reasoning whatsoever.

05-17-2002, 08:38 AM
its as relevant as your market recommendations. elrod was sayin youre a fool for calling for new lows on the naz and 2 weeks your saying buy it. i just said it could be sumthin else. but youve given no reasons why. you said the economy was goin to tank but no thinkin behind it. you say buy tech and no reasons from you. its just noise. i think the history of the peso is more useful than your market calls and a hell of a lot more interestin. its a world economy and the usa aint the only place in the world where there be investment opps.

05-18-2002, 12:10 PM
My 2cents worth:

In the early 1970's I worked in Aerospace with an engineer who married a lady from Calexico, Mexico across from Mexicali, CA. Because his wife was a Mexican citizen and his wife's mother lived in Calexico, he could and did put a lot of money in a Calexico Bank savings account because this bank was paying essentially double the USA bank interest rate. At this time, the peso was about 15 or 16 to one for the dollar -- within a few years, the peso became almost worthless and my fellow engineer lost lots of money.

Another story: I know of a brother of one of my wife's uncles by marriage. This guy lived in Mexico City and won a hugh lotto about 40 years ago. He invested it wisely and owned many arenas, apartments, warehouses, buildings and homes. After the great Mexican oil crash back maybe in the early 1979 - 1981 era(I forget the dates), he moved his family to Tijuana near San Deigo, CA, He bought up lots of La Jolla property and a shopping center in San Deigo which has appreciated about ten times in value. To be successful in Mexico you want to own bricks and dirt -- not paper money.

Years ago I met a guy (USA citizen) who had a little silver mine in interior Mexico. He told me, "just one day the Mexican government just took the mine over." No more silver mine.

On the West Coast of Mexico, I had friends who witnessed a traffic death of a man under the influence as he left a bus and attacked the oncoming traffic.The local authorities put one of my friends and the bus driver in the local calaboose to insure the witnesses don't leave the area (which any sane person would do in Mexico). You don't wana be in a Mexican jail. My friend was fed through the jail house window until the case was settled.

Also -- I had friends who owned a little trailer cabana near Rosearita Beach below Tijuana (if it's possible for a USA citizen to own something near the coast in Mexico). They rented the beach property. When the owners wanted to raise the rent -- they would shut off the water if the renters objected.

Be careful in Mexico. They use Nepoleantic Law.

William James

05-18-2002, 04:15 PM

His post seemed to be more about architecture than anything else. I have no doubt Mexico's economic and political history are relevant to investing(if you know how to interpret it).

However, you are dreaming if you think you know anything about these markets that aren't already priced into the stocks. You are just guessing and got lucky.

So you had one stock that went up 20%. So what? You're telling me that this was skill? The greatest portfolio managers in the world DON'T do 20% a year...you did it in 2 weeks?

Keep dreaming.

05-18-2002, 04:34 PM
Your quote:

People don't day-trade the Mexican market much, they trade it on fundamentals and understanding what relationships events have on stock prices and good investment possibilities.

First, people day trade EVERY market plenty. It is just that the Mexican market is not big enough for big institutions to throw tons of resources at it.

More importantly, understanding "what relationships events have on stock prices " is irrelevant. Any widely known "event" and it's ramifications are priced quickly into the market. You have NO competitive advantage unless you are dealing with information not widely known (which you probably don't) or are somehow interpreting it better than others. That MAY be true for you.

Furthermore, you seem to lack a sense of the big picture. It doesn't matter what ONE STOCK in your portfolio does. You are just like all the fools on Yahoo or other stock market exchanges talking about how great their winners are but never talking about the losers. It doesn't matter if you put 5% of your money in one stock and it goes up 20%. That adds 1% to your overall portfolio.

Focus on the big picture. How does your portfolio perform overall? How are you measuring performance and risk? Do you use a benchmark like the SP500 or MSCI World to manage against or do you just pick a bunch of stocks and hope they go up?

All my posts talk about things that are meaningful in the big picture. When I was out of stocks that made a big difference to my portfolio. When I got back in this week that makes a huge impact (one way or another!).

All your talk about buying this stock or that is noise unless you were very aggressive and placed a big % of your money in that stock. If so, we can start talking about risk if you're ready.

05-18-2002, 05:09 PM
Posted today May 17, 2002 by you:

"All my posts talk about things that are meaningful in the big picture. When I was out of stocks that made a big difference to my portfolio. When I got back in this week that makes a huge impact (one way or another!). "

are these some of the posts you made that have things that are meaningful to the big picture?

two weeks ago you posted this:

ôSP 500 will drop below Sept 21 low

Posted By: John Ho

Date: Saturday, 4 May 2002, at 3:29 a.m.

Within 2 months. It's going to be brutal...unless you're shorting


two days later you posted this:

Posted By: John Ho

Date: Monday, 6 May 2002, at 9:52 p.m.

In Response To: Re: SP 500 will drop below Sept 21 low (Jack Meehoff)

Well...I think cooler heads prevailed after the 9/11 attacks. Though the human cost was huge the effect on the economy was temporary and more shallow than people thought at the time. Beyond airlines and hotels/tourism I can't think of many industries that were hard hit for an appreciable amount of time.

There is no reason to think the 9/21 level is a true support level. In fact, you'll see on an SP500 chart that it's basically the same support level as the aftermath of the Long Term Capital Management/Russia crisis. Those lows were caused by panic over something a more efficient market would have almost glossed over. I think this time people will be horrified to realize this downturn is due to prospects of a truly weakening economy rather than panic induced by some overhyped catastrophe


three days ago you posted this:

The Stock Market

Back into stocks

Posted By: John Ho

Date: Tuesday, 14 May 2002, at 10:28 p.m.

It's here. There should be the chance for some real upside in the market. I'm going long with a lot of this money in tech which should bounce hard.

Back to the races!


so in post one you recommend going short two weeks ago. two days later you wrote the following as to the reasons to short:

"I think this time people will be horrified to realize this downturn is due to prospects of a truly weakening economy rather than panic induced by some overhyped catastrophe"

then 3 days ago you say get it all in there buying tech. hey i didnt know the economy could go from a weakening mode to a strong one in 2 weeks. wow im really getting a lot meaningful stuff from your posts. you say buy tech, no reason given. why should we believe anything you say? i seems you dont have a clue and are nothing more than a self proclaimed guru.

05-19-2002, 02:32 PM
Well I thought it would be interesting to post something that it seems a lot of people wanted to read judging by the feedback but I guess not. Assholes like you shall rule this board...don't worry keep posting completely unsubstantiated calls on the market, I won't argue with you. If anyone on here wants to communicate with me I will be in the other gambling games section. This stock section is stupid, seems like few really want to deal in theory or economic fundamentals understanding. All it has become is ego-driven I can pick them better than you. You can have your forum back John...

P.S. Sorry, would you really like to hear about my losers? That just seems like it would take up the whole forum if we all posted every single buy and sell we made. I never made any indication that I never missed anything and I further think you proved you don't know s**t about foreign markets because you have no clue how they work. Oh well.