Speculation

An unusual back-and-forth between Mexican central bank chief Guillermo Ortiz and Treasury boss Agustín Carstens over whether the sliding peso is the result of speculation from Mexican businesses has sparked a lot of conversation this week. Carstens had said yes there was speculation, and a day later Ortiz contradicted him. Macario Schettino explains the confusion: yes there was speculation, but that was speculation in favor of the peso. The companies presently accused of speculation had for years been betting on the future strength of the peso against the dollar, which had paid dividends. When the dollar suddenly strengthened a couple of weeks ago, the balance sheets of companies like Comercial Mexicana instantly got a lot worse. They had to buy dollars to pay their foreign debts, which was problematic than it had been because the peso was suddenly weaker than the dollar. Past speculation scandals saw Mexican companies selling out their pesos in favor of dollars right before a devaluation, which not only saved them millions, it made the peso's plummet all the steeper for everyone else. The present case is fundamentally different, though it's not clear if it is better or worse for Mexico.