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Article: Peso on sure footing? (Mexican peso's instability)
- Article from:
- Futures (Cedar Falls, IA)
- Article date:
- September 1, 1996
- Author:
CopyrightCOPYRIGHT 1996 Summit Business Media. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Look out below - the Mexican peso isn't as stable as you may think.
Despite the selling climax of early 1995, there is still a lot of rot under the surface, and Federal Reserve tightening later this year will bring the peso down hard. It won't be as violent as in early 1995, however, because outside investors are no longer blind to Mexico's inherent riskiness.
Mexico's Achilles heel is its gross domestic savings rate, which hovers around 16% compared to 30% to 40% in many Asian countries. Also, 45% of its population is under the age of 15, which represents a huge pool of non-workers in Mexico. Compounding the downward pressure on domestic savings is the ...