August 25, 2015This valuation of the Mexican Peso could have remarkable implications for those of us who enjoy Grupo Vidanta's new projects. One reason is US Dollars entering Mexico go much further than as recently as one year ago.
Grupo Vidanta receives a large percentage of its payments in US Dollars. For every US Dollar that comes into the company, that dollar converts into 17.2 Mexican Pesos.
What does that mean. Well, lets say a project costs one million Mexican Pesos to complete. Probably not unreasonable. The company receives one million US Dollars and converts them into seventeen million Mexican Pesos. The result is significant based only on the conversion rate alone.
But, if one were to look at the conversion rate five years ago (August 25, 2010), when one US Dollar converted into thirteen Mexican Pesos, one recognizes there is an increase of approximately four Mexican Pesos available for use today, which did not exist five years ago.
Five years is not a long period of time, but it is when considering trading timelines. So, let's shorten the time frame. Consider two years ago (August 25, 2013). The rate was about the same. One US Dollar converted into thirteen Mexican Pesos. Interestingly, there is little change when we shorten the time frame to one year ago. On August 25, 2014, one US Dollar converted into thirteen Mexican Pesos.
So, when did the spread start to increase? September 19, 2014. From then to now, the value of the US Dollar increased from thirteen Mexican Pesos to today's valuation of seventeen Mexican Pesos That is a 30% increase in the number of Mexican Pesos that one US Dollar will fetch. Certainly inflation is not increasing by that rate! (Source: http://www.tradingeconomics.com/mexico/currency)
The increase benefits Grupo Vidanta. It has received 30% more Mexican Pesos from its US members than it did one year ago, just by accepting US Dollars as payment for Maintenance Fees and contract purchases. This is great news for those of us who are members because it provides comfort that the ambitious projects that are now under way have a great chance of being adequately funded.
Serendipity! We accept all we can get.