Value Decrease in Peso Affecting Valley Businesses
MCALLEN – Over the past few months, the peso has seen a decrease in value according to the U.S. Department of Treasury.
This happened as talks with the North American Free Trade Agreement continue.
CHANNEL 5 NEWS stopped by several exchange places here in the Rio Grande Valley where 18 pesos would get you one U.S. dollar. Five years ago, the exchange was 13 pesos to one U.S. dollar.
While it's not at the lowest it's been all year, the shift is catching the eyes of businesses.
Margarita Ariza, owner of Creative Store in downtown McAllen, said dealing with two currencies is part of the job.
"What we do is talk to the bank and we ask what the exchange rate to the dollar. We do it at that moment to see what the rate is," said Ariza.
Ariza has owned her shop in downtown McAllen for the past seven years.
Whenever the peso drops in value, Ariza also sees a drop in customers.
"It's unfortunate because most of the year we've had fewer clients because the exchange rate was very high," said Ariza.
Ariza said this has been more so the case these past couple weeks.
Dr. Salvador Contreras, a University of Texas Rio Grande Valley associate professor of economics, said this tends to happen when the peso drops.
"You need more pesos to buy an additional dollar to translate just buying fewer goods if you decide to come to the U.S. to buy goods," said Contreras.
Contreras said part of the reason for the current state of the peso is due to the current NAFTA renegotiation talks.
He said the slight decline started roughly when talks began.
"This has not been a positive sign for both the peso, the Mexican peso and the Canadian dollar," said Contreras.
While a decision has yet to be made, Contreras said markets tend to fluctuate based on what may happen and can even over react.
He said we saw this with the peso earlier this year in mid-January when it reached an all-time low.
"There was an over shoot at the beginning of the year, it went too far. It was basically retrenching, the peso lost too much value (this summer) it just going back to a natural level," said Contreras.
While in the downtown McAllen area, CHANNEL 5 NEWS came across a couple businesses who said they've stopped taking the peso because it fluctuates.
Ariza said she will continue to accept the peso at her business.
With NAFTA talks expected to continue into next year, Contreras expects exchange rates with the peso to stay consistent.
With elections in Mexico coming up next year, he adds we can expect to see some shifts in value again.