Over the last couple of weeks, the value of the peso has been much on the minds of bureaucrats, economists, bankers, mutual fund gurus and great thinkers such as myself. Everyone seems to be in agreement: the peso is — yet again — overvalued. Just how much it is overvalued, is what all the hot air is about.

The loudest voice so far has belonged to MIT economist Rudiger Dornbusch, a hardline globalist who advocates drastic devaluation in order to boost the export sector of the economy (a cheap peso means cheaper dollar prices on export goods). Like many of his academic persuasion, Herr Dornbusch is more interested in the model than the people who suffer under it. No Mexican politician in his right mind would advocate further impoverishing the Mexican people in the interests of making Mexico safer for its’ balance of payments (even if that is what they intended to do).

President Zedillo, on the other hand, has been saying two very contradictory things. On the one hand he is foursquare behind a “free floating” peso. On the other hand he favors allowing the peso to float within a “band” of prices, with a set minimum and maximum. When challenged about this seeming contradiction, he replied that he meant that the peso should float until it is “stable”, and then be put into a band. When it was pointed out that he has of late called the peso “stable”, so what’s he waiting for, he mumbled.

Meanwhile, much to the delight of us gringos, the peso has finally begun to fall off the summer-long plateau of 7.3 to 7.4 at the casetas de cambio; yesterday it was selling at 7.5 to the dollar, today at 7.58; and conservative estimates place it at 8.25 by year’s end.

The exchange rate before the 1994 devaluation was 3.5 to one, making today’s dollar worth over twice as much as it was two years ago. The predictions imply a coming rate of 2 1/2 times 1994.


Those of us who live here have begun to notice that the shops and restaurants that cater to tourists here in Oaxaca are raising their prices more rapidly than are the merchants who sell mostly to Mexicans. While the price of coffee in the market has gone up from 12 pesos for a half kilo to 17 pesos (a little over 50%), the price of a capuccino in one of the sidewalk cafes around the zocalo has risen from 4.5 pesos to 9 (twice the rate of inflation). Onions have risen 35%; onion soup 100%.

However, before you start shedding tears for us, remember that for most of us our income is in dollars, and theirs is in pesos; and factor in the cost of cooking gas (up 100%), electricity (100%) and other overhead costs. Of course we pay those costs too, as residents. Our living expenses have increased only 30% in the last two years, from about $375/mo each, to about $475 (including an annual 20% increase in rent: standard for Mexicans, too). In fact, relative to the local folks, our ability to sustain ourselves here has increased substantially. They, on the other hand, are in deep doo-doo.


EPR attacks in Oaxaca, including the resort area of Huatulco, have not slowed tourism in this part of the world for a single minute. More than ever, folks are pouring over the border to tour, visit, settle and study. By October 1, there were no rooms left in the hotels in the Center north of the Zocalo for Day of the Dead. The Parador Guzman, an apartment hotel that sees a lot of gringo action, was filled for the winter months, some time in September. Word reaching here from Huatulco suggests that there have been no cancellations, and that Christmas week is filling up fast.

At least partially responsible for the blasé response of potential visitors is the clear declaration by the EPR that tourists are safe from kidnap, which is reserved for rich Mexicans. However, the low dollar price of touring is certainly a strong factor. This in spite of the fact that the US state department keeps issuing and then rescinding advisories against travel to some areas of Mexico. So c’mon down, it’s safe and it’s cheap.


Tomatoes (jitomates en Español) are one of Mexico’s largest export agricultural crop. The US is the biggest customer. When NAFTA was passed, we all though that that meant that tomatoes (along with avocados) would be allowed entrance to the US without extra charge. We forgot about presidential politics.

Last year, an association of tomato growers in Florida sued to have a quota and/or an import duty put on Mexican tomatoes. When asked why they did this, a Florida congressperson said that Mexican produce “is just too good and too low priced” for his constituents to compete. Unable to prove “dumping” (charging an artificially low price, often below what the product would sell at in the country of origin), the US dpt of commerce was nonetheless able, just by dragging the process along, to prevent huge amounts of tomatoes from leaving Mexico.

Finally, on Monday, the Mexicans agreed to self-impose a minimum price a fraction of a cent higher that what the Florida growers charge. Better than letting it rot on the vine. But not, definitely not in the spirit of NAFTA.

Immediately, Jack Kemp, republican party nominee for vice president, cried foul. Just another case of the Democrats passing special legislation to benefit a small but powerful group, sez he. Free trade should be free.

Well, although I hate to admit it, even a Republican can be right every once in a while. I just wish he hadn’t invoked the “brown Peril” to make his point, saying that Clinton’s move would require “another 20 billion dollar loan to bail out Mexico”, and put more pressure on our borders by causing more dislocations in the Mexican economy.


Yesterday, before a massed conference of 4,000 debtors, the director of the debtor’s group El Barzon Nacional announced that meetings will be held in early November between his organization and representatives of banks in Canada, France and Japan, the purpose of which will be to form First Barzonista Bank. The institution will lend money directly to its’ members, mostly for agricultural loans.