MXN – Mexican Peso
The peso is symbolised by the "$" sign and has a currency code of MXN. There is currently US$3.1 trillion in circulation. A volume of approximately US$135 billion is traded daily including spot and futures trade. The currency is regulated by the Mexican central bank, also known as the Banco de Mexico. The currency has banknotes of $20, $50, $100, $200, $500, and $1000, and the banknotes feature images of Mexican revolutionary leaders on one side and Mexican cultural monuments and icons on the other.
The History Of The Mexican Peso: A Spanish Legacy
Mexico's peso traces its history to the colonisation of the country by the Spanish following its conquest by Spanish Explorer Hernán Cortés in 1519.
The first Spanish coin known as a "Real," or "Royal," was created by a decree signed by king Don Pedro of Castile (1350-65). That coin came bearing the Latin expression Numus Regalis (or "royal coin"). At the time of the conquest of Mexico and thereafter, the coins that circulated in Spain and that were used by Spanish mariners and merchants were silver reals, copper maravedí coins and gold escudos. From Mexico itself, stamped gold discs known as Tupuzque were also traded as currency.
The first Mexican mint, La Casa de Moneda, was established in the country in 1535 under the orders of the Spanish crown, and it was the first mint in the Americas. The first coins produced at the mint were Spanish Carlos y Juana coins, featuring the names of Queen Juana of Spain and her son, prince Carlos I, who ruled in her name. The coins were produced in the values of 4,3,2,1 and ½ reals.
Documents from the Spanish crown had referred to coins valued at 8 Reals as worth a "peso," or "weight," though that term did not appear on the actual coins at the time. The first 8-real piece, or "peso," coins were minted in Mexico under the reign of Spanish King Felipe II, who ruled from 1556 to 1598.
Outside of the Spanish-speaking world, the 8-real coins were widely traded in both the New World and on trade routes to the Far East, and they came to be known as "Spanish dollars." The term dollar was based on earlier German coins called "thalers." As the Spanish coins were minted in silver and based on a standard weight, they were sometimes cut by users into equally sized fractional wedge "pieces of 8" to facilitate small trade.
Amid the turmoil of the Napoleonic wars in Europe, Spain's King Ferdinand VII was forced to abdicate the Spanish throne in 1808 in favour of Napoleon Bonaparte's brother, Joseph Bonaparte. While the Bonapartes were eventually defeated and Ferdinand restored to power under reduced constitutional powers, the vacuum created by the situation fueled a movement toward independence in Mexico.
By 1821, rebels in Mexico, led by Mexican Gen. Augustín de Iturbide, succeeded in declaring independence. Iturbide and his backers formed a monarchy and he was declared emperor of the independent state of Mexico. In 1822, the Mexican mint issued the first national currency. It also was during this period that the government first began to issue banknotes. However, Iturbide's government was overthrown in 1823, and in 1824 the Mexican mint began to issue coins under the authorisation of the republic of Mexico. The coins at this time remained under the 8-real system.
The first coin with the denomination of "peso" was minted in 1864 during a brief second Mexican empire ruled by Archduke Ferdinand Maximilian of Austria, whose rule was backed by the government of French government of Napoleon III. Maximilian's government abolished the 8-piece system and issued currency with denominations under the decimal system, and subdivisions in units of 1/100th called "centavos."
Maximilian was overthrown in 1867 and Benito Juarez became president under a restored republic, but the decimal-based currency system established by Maximilian was maintained. The currency kept that format through the 1970s and '80s, when the country underwent a period of extreme inflation and debt default following an international oil crisis. In 1992 the country issued a new currency called the "Nuevo Peso," or "New Peso," that was equivalent to 1,000 units of the old currency. However, with the stabilisation of the economy, by 1996 the government dropped the "Nuevo" designation, and the currency once again resumed its original designation as simply the "peso."
Monetary policy in Mexico is determined by the central bank known as the Banco de Mexico. The country's target overnight interest rate is set at monetary policy meetings of the bank's board of governors, which are scheduled eight times per year at intervals of around 35 to 45 days. The current meeting schedule has been set up to follow meetings held by the U.S. Federal Reserve.
Mexico's central bank says that it aims to pursue "an environment of low and stable inflation," which "contributes to create the appropriate conditions for both sustained growth and the creation of permanent jobs." It uses an inflation targeting system to adjust the interest rate, based on the variation of the country's consumer price index.
Economy Of Mexico
Mexico is the 12th largest global economy ranked according to its gross domestic product. In the years since the North American Free Trade Agreement (NAFTA) took effect in 1994, Mexico's economy has become increasingly oriented toward manufacturing. The country's top industries include food and beverages, tobacco, chemicals, iron and steel, petroleum, mining, textiles, clothing, motor vehicles, consumer durables and tourism. In recent years, Mexico's government has undertaken economic reforms and implemented legislation in the areas of education, energy, financial, fiscal and telecommunications, among others, with the long-term aim to improve growth and competitiveness across the economy.
Despite expectations of improving activity as a result of increased investment and stronger demand for Mexican exports, growth is seen remaining below potential due to inefficiencies, with a large portion of the economy and workforce in the informal sector, and corruption. In the medium-term, the economy is seen as vulnerable to global economic pressures, like lower external demand, rising interest rates, and low oil prices. About 30% of government revenue comes from the state-owned oil company, PEMEX.
Despite some advances, income distribution remains highly unequal. Mexico's per capita income is about one-third that of the US. However, the increasing integration of supply chains, development of the energy sector, and focus on trade facilitation will continue to make the North American region increasingly competitive and contribute to Mexican economic development.
Mexico has free trade agreements with 46 countries, putting more than 90% of the country's trade under free trade agreements. Mexico's top trading partners are the U.S, Canada, China, Spain, Brazil, Japan, Germany and South Korea. Mexico has become the United States' second-largest export market and third-largest source of imports. In 2014, two-way trade in goods and services exceeded U$550 billion. In 2012, Mexico joined the Trans-Pacific Partnership negotiations and entered the Pacific Alliance with Peru, Colombia and Chile.
Financial trading in Mexico is regulated by the Comisión Nacional Bancaria y de Valores. Foreign exchange policy is specifically regulated by Mexico's Foreign Exchange Commission, which is made up of officials from the Ministry of Finance and Banco de México.
Major Mexican Peso Currency Pairs
The Mexican peso is commonly traded with several currencies, including USD, EUR, CAD and JPY as well as with other currencies in synthetic pairs. The peso is the eighth-most-traded currency internationally.
Peso Bills And Coins
Pesos have been issued as coins, paper money and plastic polymer money. Mexico's currency is printed by the national mint, called the Casa de Moneda. Some of the popular nicknames for peso include plata, lana, papiro and billetes. Coins of a value of as low as 1/100th of a peso (0.01 peso) are denominated as "centavos." Of common use are coins of 50 centavos, 1 peso, 2 pesos, 5 pesos and 10 pesos.
The Peso Around The World
The Mexican peso has gained popularity as a trading instrument in recent years due to increasing trade with North American partners through NAFTA and successful government efforts to stabilise the economy. The currency has also seen benefits from Mexico's initiatives to expand trade through the Trans-Pacific Partnership and the Pacific Alliance.
Where Is The Peso Today?
Despite solid growth figures and inflation control measures, the peso has drifted to successive lows in recent years under the influence of falling international oil prices, concerns over the outlook for emerging markets, and hints at possible future interest rate hikes in the U.S. that have prompted a flight to U.S. assets amid a search for improving returns. The weaker currency should also serve as a benefit to Mexico's economy, however, by stimulating investment, exports and increased tourism in the region.
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