The Mexican peso, MXN, was originally based on the silver dollar of Imperial Spain. It was originally minted from pure silver and was the first currency to use a distinct border and exact weight to protect from counterfeits, making it very popular. On July 6, 1785 the peso became the official currency system for all of North America, including the United States. When the U.S. dollar was introduced on April 2, 1792, it was based on the peso with the exchange rate of 1 dollar to 1 peso. The peso continued to be officially accepted in the U.S. until 1857, and in Canada until 1858. The peso was a very stable currency experiencing very little inflation until the 1970s when Mexico experienced an oil crisis and was forced to default on its external debt in 1982. Several years of inflation and devaluation followed until 1993 when Mexico issued the Nuevo peso to replace the former peso. In 1993 the "Nuevo" was dropped from both the name and the notes and the peso is again the currency used in Mexico today.
| Moody's Rating |
| Baa2 |
| S&P Rating |
| BBB- |
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What does it look like?
Political Structure
The United Mexican States are divided into 31 states and one federal district. The government is presidential with a strong Congress. The President is elected to a six-year term and may not run for re-election when his term expires. The Congress is bicameral consisting of a 128-member Senate and a 500-member Chamber of Deputies. There is a federal Supreme Court but it is not viewed as a separate branch of the government.
Prominent Figures
The President of Mexico is Felipe de Jesus Calderon Hinojosa. The central bank of Mexico is Banco de Mexico. A board of directors headed by a Governor Guillermo Ortiz Martinez, runs the bank.
Unique Characteristics
In 1994 the "Mexican peso crisis" erupted and lasted until 1995. During this time, the Mexican government let the peso float, removing the crawling peg that had previously been in place, which resulted in it depreciating to half of what it had previously been worth. There has been much debate over what political policies may have lead to the crisis and whether or not devaluation was inevitable, but in the end it was a full year before the peso began to rally and it has been doing so ever since.
Key Economic Factors
According to the World Bank, Mexico has the highest per capita income in Latin America. The Mexican economy relies highly on the private sector, as there are only about 200 state-owned enterprises, down from over 1000 in the 1980s. Although the economy struggled in the mid-1990s, a strong export sector helped to revive the state of the economy and the currency in the late 1990s and into the 21st century. Mexico still needs to overcome many structural problems as it strives to modernize its economy and raise living standards. Income distribution is very unequal, with the top 20% of income earners accounting for 55% of income.
The Mexican economy has undergone a profound transformation since the 1980s as a result of economic liberalization and joining the North American Free-Trade Agreement (NAFTA, a free-trade bloc with the US and Canada). Having relied heavily on oil for foreign-exchange earnings in the late 1970s, manufacturing quickly became the main source of export earnings. In 2003 the sector accounted for around 20% of GDP and around 85% of export earnings, according to preliminary estimates. Almost half of total exports were produced in maquiladoras (in-bond assembly for re-export plants). Services, however, are the most important contributor to national output. During the first three quarters of 2003 the sector accounted for 66.6% of GDP.
Agriculture has declined in importance, economically (it accounted for just 4% of GDP in 2003) but remains an important source of employment (around one-fifth of the workforce is involved in agricultural activities). Mining is estimated at just 1.4% of GDP in 2003 but this heavily understates the importance of oil production to the economy and, particularly, to the Treasury. Oil exports represented 11.3% of total export earnings in 2003.
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