Mexico’s Government Is Working on a Trump Contingency Plan

Bloomberg – by Nacha Cattan

Financial leaders in Mexico anticipating the prospect of volatility in their markets or a deleterious effect on trade following the result of the U.S. presidential election are weighing the idea of a wall of their own — call it a firewall.

Central Bank Governor Agustin Carstens, who has expressed concern about the fallout from a victory by Republican nominee Donald Trump — in the past calling him a “hurricane” for Mexico’s economy — said the nation could see a period of volatility no matter who wins the vote on Nov. 8, Milenio TV reported. The central bank is working on a contingency plan with Finance Minister Jose Antonio Meade, who said in an interview Wednesday with Televisa that he doesn’t see much point in intervening in the peso to bolster the currency, at least at this time.  

The peso has fallen by 11 percent against the dollar this year through Tuesday, the most of any major currency after the British pound, and dropped sharply in recent days as prospects of a Trump victory improved. Trump’s fortunes in the election have routinely affected the peso after he vowed to build a border wall between the U.S. and Mexico and to renegotiate trade terms that could lead to higher tariffs for a nation that sends almost 80 percent of its exports to the U.S.

“If the adverse scenario manifests itself, it’s possible that Mexican authorities will respond in some way,” Carstens said, according to Milenio. “It’s a contingency plan that we’re talking with the finance minister about. We hope we don’t have to use it.”

The central bank has raised interest rates 1.5 percentage points this year to boost the peso, including a surprise increase in February carried out alongside the finance ministry’s sale of greenbacks. Dollars haven’t been sold since.

Meade told Televisa that Mexico has taken measures that have worked against volatility in the market, but that selling dollars to prop up the peso in this scenario would be futile.

“If what we have is a global concern surrounding the result of November 8, where the markets of the world — not ours, not a local phenomenon, not a phenomenon that we can resolve with intervention — is moving our exchange rate, then intervention would be like throwing drops of water into the ocean,” Meade told Televisa. “It’s not the instrument that would help us.”

The peso rebounded Thursday following polls showing Democratic nominee Hillary Clinton holding a lead over Trump.

One thought on “Mexico’s Government Is Working on a Trump Contingency Plan

  1. “If the adverse scenario manifests itself, it’s possible that Mexican authorities will respond in some way,” Carstens said…”

    By begging for mercy, no doubt.

    And for more ‘foreign aid’.

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