The dark perspectives for the Mexican economy next year will cause losses of jobs in various sectors, warned the head of the Ministry of Labor and Social Welfare, Alfonso Navarrete.
He said that this will be marked in the sectors most affected by the peso depreciation and the reduction of public spending, news outlets reported.
He said you cannot yet calculate the magnitude of the impact, although there are seasonal declines in manufacturing production, particularly in steel, where is necessary to apply protection measures.
This type of economic circumstances is not widely spread, but specific for various sectors and also changing over time, he noted.
He expressed himself in favor of the protection of low-income workers, whose access to basic food basket will be hindered by the inflation caused by the volatility of the peso against the dollar.
He assured that the negative effects are not the consequence of structural reforms promoted by President Enrique Pena Nieto, but by external factors.
Peso Battered
The battered Mexican peso has tumbled to historic new lows in recent days, nearing a psychological barrier of 20 pesos to the US dollar and causing anxiety on the streets, at businesses and in the halls of government.
Among other factors, many point to the recent rise in US presidential polls of Donald Trump, the Republican nominee who has vowed to build a wall along the US-Mexico border and has been widely accused in Washington of Mexico-bashing.
The Mexican currency plunged to a record low of about 19.90 to the dollar last week and has hovered near 20 to the dollar for days. Exchange houses are already posting signs offering a 20-peso exchange rate.
Despite official declarations downplaying the devaluation, some analysts are warning that things could get worse and assailing what they call government inaction.
“It appears that the authorities in charge of the politics, economics and finances of the country are flummoxed, paralyzed by the magnitude of the devaluation,” wrote columnist Enrique Galvan Ochoa in Mexico’s La Jornada newspaper. “And the effects of the phenomenon could extend to the large companies of the private sector, deeply indebted in dollars.”
Nieto, already facing record-low approval ratings, lamented that many Mexicans view a falling peso as “synonymous with a crisis.”
But the president told Radio Formula, “This cannot be associated with economic crisis.”
Economists cite a number of other causes, including the drop in oil prices since mid-2014, Mexico’s generally sluggish growth and predictions of a US interest rate hike.
Whatever the reasons, the plummeting peso has generated considerable concern. The peso has dropped almost 14% in value against the dollar this year and nearly 50% since September 2014.
Fast-Rising Food Prices
While inflation officially remains low—beneath the central bank’s 3% annual target—many here complain of fast-rising prices of food and other basic items, stretching already strained family budgets.
“Prices have been rising for months,” said Rosa Maria Tellez, a nurse and mother of three. “Now you go to the supermarket and pay double, or leave with half the products you could have bought a year ago. This business with the dollar will only make it worse. … Everyone raises their prices and says it’s because the dollar increased in value.”
“The economic situation is worse every day. We don’t have enough money in our pockets,” said Torres. “One has to go in debt and borrow to finish off the month.”
For the multitudes of Mexicans who depend on remittances—dollars sent home by expatriate Mexican citizens residing in the United States and elsewhere—the devaluation has represented something of a windfall. The stronger dollar means they receive more pesos for every buck sent home.
