Officials at the Council of Industrial Chambers of the State of Jalisco (CCIJ) expect that an exchange rate that is favorable to the dollar will affect Mexican industry.
Exchange rate fluctuations have repercussions
The Council of Chambers Industry, Tourism and Services of the State of Jalisco, or CONCANACO as it is known by its Spanish acronym, sees the rises of prices in Mexico imminent, should the US dollar continue to rise in value against the Mexican national currency over the next weeks and months. The change of exchange rate in this manner will create an environment in which there could be a rise in the costs of material inputs utilized by Mexican industry.
According to Juan Niño Cota, the coordinator of the CCIJ, Mexican industry has been absorbing incremental cost increases for items used in production that are imported, mainly from the United States over the course of the last year as the dollar has gained value against the Mexican Peso. Should this trend continue, he anticipates that the result will be a rise in cost of the output of Mexican industry. In recent days the US Dollar – Mexican Peso exchange rate has risen to a high of almost 18:1. Niño Cota sees this circumstance as being the result of generalized global economic uncertainty, as well as specific problems currently being experienced by the formidable Chinese economy.
Actions taken by the Mexican government through recent fiscal reforms and administered by the nation’s tax authority, the Secretaría de Hacienda y Crédito Público and its Tax Administration Service (SAT) are expected to generate the necessary income to enable the country to deal with the situation in a satisfactory manner.
Mexican industry exporters see benefits
Despite the challenges that an unfavorable exchange rate presents domestically, some groups, specifically those involved in the export trade sector, see a silver lining in this particular cloud. According to Miguel Angel Landeros, the president of the Mexican Council of Foreign Trade (COMCE) for the country’s western region, “any sector of Mexican industry that exports products that use little imported materials will make gains under these conditions.”
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