When will the Mexican peso begin to behave rationally again? A perspective from our CEO

I person written astir the peso galore times before. Other than safety, I would reason that determination is nary different contented that affects everyone similar that of the peso. Business radical making concern decisions — acrophobic astir the peso. Low income families successful Mexico depending connected ligament transfers successful USD from household members successful the U.S. — watching the peso. Expats surviving successful Mexico and vacationers to Mexico making budgeting/planning decisions — disquieted astir the peso. And Mexican families looking to abrogation overseas oregon bargain overseas goods — you guessed it, intimately monitoring the peso.

As 2025 came to a adjacent with the peso touching beneath 18, we learned that the peso appreciated much successful the twelvemonth against the USD than it ever has successful modern past (since 1994 to beryllium exact). Think astir that for a minute. Literally nary 1 was expecting the peso to admit past twelvemonth — the mean prediction of the “expert analysts” was a depreciation to 21 — and alternatively it got stronger! At the hazard of getting a small wonky, deliberation of each of the events of past twelvemonth that, successful theory, should person caused the peso to weaken successful 2025:

1. President Trump’s changeless threats against Mexico for everything from drugs, water, immigration, commercialized and more.

2. President Trump’s “America First” policies, threatening the worth proposition of Mexican manufacturing.

3. President Trump’s tariffs against Mexico and successful peculiar the captious automotive, alloy and aluminum industries.

4. Record amounts of caller concern announcements successful the U.S. that, if anything, should person made the USD stronger versus emerging marketplace economies similar Mexico.

5. The (I would reason incorrect) rhetoric from the absorption that the recently elected President Sheinbaum was anti-business and had socialist policies that would crook the state into the adjacent Venezuela.

6. Mexico’s 2025 economical maturation was terrible, with GDP increasing little than 1% for the twelvemonth versus astir 3% for the United States and 3% globally.

7. Mexico lowered its involvement rates overmuch faster than the U.S., making the peso little charismatic compared to different countries that lowered involvement rates much slowly. (It is often the complaint of alteration that is much impactful connected a currency versus the implicit rate.)

8. Mexico’s ostentation complaint is higher than that of the U.S.

9. Even the thought of the USMCA commercialized statement not being renewed is perchance catastrophic for Mexico.

Any 1 of these events could person caused the peso to weaken successful a emblematic year, and the peso historically has devalued for little impactful reasons. In fact, the peso has connected mean devalued against the USD astir 10% annually implicit the past 30 years!

Pros and cons of the ‘superpeso’: A position from our CEO

So what is going connected here? And what should we expect for 2026? Let’s commencement with what modular economical mentation (which arguably was precise incorrect successful 2025) would archer america astir what should hap to the peso successful 2026:

1. Mexico’s system volition turn slower than the US system — downside hazard for the peso.

2. Significant USMCA renewal hazard (economic tensions) passim the twelvemonth — downside hazard for the peso.

3. Expansion of the warfare connected drugs to see Mexico (geopolitical tensions) — downside hazard for the peso.

4. Mexico’s ostentation complaint remains higher than the U.S. complaint — downside hazard for the peso.

5. Mexico’s involvement complaint continues to beryllium lowered owed to slowing system — downside hazard for the peso.

In fact, I don’t spot immoderate factors successful the abbreviated word that (using modular economical theory) would constituent to a strengthening of the peso successful 2026. But of people determination is often an important constituent to speech rates that don’t travel modular theory.

So what could beryllium the logic astir a continued strengthening of the peso (or adjacent maintaining the existent rate) this year? Here are a few:

1. Markets and companies globally progressively admit that Mexico is critically important to the U.S. arsenic China tensions increase.

2. Faith that the USMCA statement volition beryllium renewed and perchance adjacent fortify economical ties betwixt the U.S., Mexico and Canada.

3. The content that the U.S. warfare connected drugs could really payment Mexico, making it much charismatic to investment.

4. Increasing assurance successful President Sheinbaum’s policies being pro-growth and business-friendly.

5. The content that Mexico mightiness statesman to unfastened up its vigor manufacture to overseas investment.

Mexico successful the past has relied connected the changeless devaluing of the peso to support the state competitory and charismatic for overseas investment. Those devaluations reliably provided a short-term boost to the economy, but kept the state from making the kinds of investments resulting successful semipermanent growth. 2026 is going to beryllium a cardinal twelvemonth for Mexico to show if it is worthy of its beardown currency, oregon if it volition autumn into the trap of a peso devaluation to foodstuff the economy. Stay tuned … MND volition beryllium your beforehand enactment spot for each tick of the peso. It is going to beryllium fascinating to watch.

Travis Bembenek is the CEO of Mexico News Daily and has been living, moving oregon playing successful Mexico for astir 30 years.