The Mexican peso (symbol: $; currency code: MXN; also abbreviated Mex$ to distinguish it from other peso-denominated currencies) is the official currency of Mexico. The currency was first introduced in 1863, replacing the old Spanish colonial real.
Each peso is subdivided into 100 centavos, represented by "¢". Mexican banknotes are issued by the Bank of Mexico in various denominations and feature vibrant colors and imagery representing Mexican culture and history. Modern peso and dollar currencies have a common origin in the 16th–19th century Spanish dollar, most continuing to use its sign, "$". During the era of silver coinage, the Spanish dollar and the Mexican peso circulated globally in trade and as reserve currencies. They were also legal tender in the United States, Canada, and China, and served as a model for the U.S dollar and several other currencies.
The current ISO 4217 code for the peso is MXN; the "N" refers to the "new peso". Prior to the 1993 revaluation, the code MXP was used. The Mexican peso is the 16th most traded currency in the world, the third most traded currency from the Americas (after the United States dollar and Canadian dollar), and the most traded currency from Latin America.
History
Etymology
The name was first used in reference to pesos oro ('gold weights') or pesos plata ('silver weights'). The Spanish word peso means "weight". (Compare the British pound sterling.) Other countries that use the term pesos for the currency include: Argentina, Chile, Colombia, Cuba, Dominican Republic, the Philippines, and Uruguay.
Precursor
The currency system in use in Spanish America from the 16th to 19th centuries consisted of silver reales, weight 3.433 grams and fineness 67⁄72 = 93.1%, as well as gold escudos, weight 3.383 g and fineness 11⁄12 = 91.7%. By the 19th century the silver real weighed 3.383 g, fineness 65⁄72 = 90.3%, while the gold escudo's fineness was reduced to 21 karats or 21⁄24, or 87.5% fine.
15 or 16 silver reales were worth a gold escudo, and eight-real coins of 24.44 g fine silver were widely called pesos in Spanish America and dollars in Britain and its American colonies. These pesos, or dollars, were minted from the rich silver mine outputs of modern-day Mexico and Bolivia and exported in large quantities to Europe and Asia. These pesos served as a global silver standard reserve currency until the start of the 20th century and became the model for the various pesos of Spanish America as well as (among others) the United States dollar, Chinese yuan and Japanese yen. Mexican silver pesos of original cap-and-ray design were legal tender in the United States until 1857 and in China until 1935.
Origin
The first Mexican mint to produce pesos was established in 1535.
While the United States divided their dollar into 100 cents early on from 1793, post-independence Mexico retained the peso of eight reales until 1863 when the Second Mexican Empire under Emperor Maximillan commenced the minting of pesos divided into 100 centavos. The restored Mexican republic under Benito Juárez and Porfirio Díaz continued the minting of centavo coins in base metal or silver, as well as gold coins in pesos, but it had to revert the silver one-peso coin to the old eight-reales cap-and-ray design from 1873 to 1897 after East Asian merchants rejected or discounted the newly designed peso coins.
The post-independence silver peso contained 27.07 grams of 90.3% fine silver (24.44 g fine) while the gold peso or half escudo contained 1.6915 grams of 87.5% fine gold (1.48 g fine). After most of Europe switched to the gold standard in the 1870s the gold peso substantially rose in value against the silver peso, until it became 2 silver pesos to a gold peso or a gold peso dollar by 1900. In 1905 the peso was solely defined as 0.75 g fine gold.
From 1918 onward the weight and fineness of all the silver coins declined, until 1979, when the last silver 100-peso coins were minted. The U.S. dollar was worth 2.00 silver pesos from 1905 to 1929, rising afterward until it stabilized at 12.50 pesos from 1954 to 1976.
Throughout most of the 20th century, the Mexican peso remained one of the more stable currencies in Latin America, since the economy did not experience periods of hyperinflation common to other countries in the region.
Devaluations in 1976 and 1982
The U.S. dollar leapt from 12.50 to 19.40 pesos in 1976. After the oil crisis of the late 1970s, Mexico defaulted on its external debt in 1982, causing severe capital flight and several years of inflation and devaluation. The dollar again rose from 23 to 150 pesos that year, causing any company with loans in USD and contracts in MXP to have their financial position weakened by the devaluation, the result becoming high unemployment and pressure on remaining employees to pick up the increased workloads and putting strain on economic hardships. Government attempts to fix the economy with an inward-looking industrialization strategy were only sustainable with severe economic imbalances that needed large inward capital flows that could not be maintained, and an abrupt process of stabilization and adjustment followed that saw a recession in 1983, stabilizing only in the early 1990s at above 3,000 MXP/USD when a government economic strategy called the "Stability and Economic Growth Pact" (Pacto de estabilidad y crecimiento económico, PECE) was adopted under President Carlos Salinas.
New peso, 1993
On January 1, 1993, the Bank of Mexico introduced a new currency, the nuevo peso ("new peso", or MXN), written "N$" followed by the numerical amount. One new peso, or N$1.00, was equal to 1,000 of the obsolete MXP pesos.
New peso notes and coins
The transition was done with minimal confusion by issuing the Series B "nuevo peso" banknotes in N$10, $20, $50, and $100 denominations with designs nearly identical to the corresponding banknote in the preceding Series A, which were labelled in old pesos (MXP $10,000, $20,000, $50,000, and $100,000, respectively); for Series B, the equivalent nuevo peso face value was 1⁄1000 of the old peso face value for Series A. For example, the Series A old peso MXP$20,000 and the Series B nuevo peso MXN$20 banknotes share the same design, aside from the updated face value. Old and new pesos circulated simultaneously between 1993 and 1995, but old peso Series A banknotes were gradually retired at this time, and newly designed Series C "nuevo peso" banknotes commenced in 1994. From January 1, 1996, the "nuevo peso" was simply renamed to "peso", and new Series D banknotes were issued identical to Series C except for the word "nuevo" dropped. The ISO 4217 code remained unchanged as MXN. Series A and AA banknotes were demonetized and no longer legal tender as of January 1, 1996. Although they remain legal tender, Series B, C, D, and D1 banknotes are in the process of being withdrawn from circulation; in addition, the MXN$1000 Series F banknote is being withdrawn. The most commonly circulated banknotes in Mexico are MXN$20 and above in Series F and G.
Similarly, Series B coins in nuevo peso denominations were circulated starting from 1993 and Series A and AA coins were demonetized starting from November 15, 1995. Unlike the notes, Series B coins differed in size and design from the Series A coins. Series C coins (which dropped the "N$" prefix on the MXN$1, N$5, N$10, N$20, and N$50 coins) were circulated starting in 1996 following the withdrawal of Series A and AA coins. Series B and C coins in uncommon denominations (10-centavo and MXN$20 and greater) are gradually being withdrawn from circulation. Although they remain legal tender, they are set aside when they arrive at commercial banks. The most commonly circulated coins in Mexico are MXN$10 and below in Series C and D.
Economic effects
The government's operational balances had been predicted to remain stable as the country was operating in a surplus between 1990 and 1994. This crisis was seen as the fault of the Mexican government in its signing of NAFTA at the beginning of 1994. The volatility of MXN increased after the ratification of NAFTA, when the annualized standard deviations seem to be highest post-1994, especially in terms of USD, compared to the United States, which experienced the lowest annualized standard deviation during that same period. Still, several contemporary economists of the time noted the unexpected shocks to the economy during 1994, which exacerbated the situation, starting with the assassination of presidential candidate Luis Donaldo Colosio, causing a ripple effect on the exchange rate and interest rates that resulted in increased capital leaving the country. The result was the devaluation of MXN because of a domestic recession and an avalanche of investor withdrawals due to concern about the government's inability to remain liquid in its international debt repayments. The international outlook, particularly in Wall Street, on the MXN peso crisis was affected by the lack of information on Mexico's financial reserves from the Banco de Mexico, which only released information on Mexico's reserves three times a year, and the speed of reserve depletion to stabilize the MXN finally resulted in a 15% devaluation by 20 December 1994 and a lack of clear announcements on how the Mexican government was going to handle the crisis. In one day, Banco de Mexico lost US$4 billion in holdings. The 1994 crisis was more devastating as it was released on a new peso currency. The adoption of MXN in 1993 was meant to balance the economy, and MXP 1000 was the same as MXN 1 upon its 1993 introduction. The MXN crisis let investors in 1995 see a failure of Mexican authorities to act with a lack of preparation to soften the devaluation with a more substantial commitment to maintaining the stability of the exchange rates and questioning further investment in the economy. As the GNP fell by 9.2% in 1995, the panic of the MXN devaluation was significant to Mexican citizens, as the peso depreciated against the USD by 82.9%, while the interest rates rose from 10.5 to 42.7%. The unemployment rates of married male employees increased significantly in urban areas of Mexico, resulting in married women and teenagers from the same households finding employment to prevent the financial collapse of domestic quality of life. Married women with an unemployed husband experienced an employment rate of 33.84% and an unemployment rate of 1.62% compared with unmarried women during this period. The unexpected increase in Mexican immigration, both legal and illegal, in 1995 resulted from the MXN devaluation, pushing Mexican citizens to seek better employment opportunities in the United States. Migration in 1995 was 40% higher than the average level of the rest of the 1990s, with 200,000 to 300,000 more Mexicans immigrating over the border, increasing a labour shock in Mexico that also affected parts of the southwestern United States. There was a significant decline in Mexican household expenditure during this time, where durable and semidurable commodities like televisions, glassware, clothing, and other goods that could be postponed fell between 1996 and 1998, while household food expenditure increased, with lower income households seeing an increase of 3.5% and middle-class households seeing a 2.4% increase, due to the resulting inflation of prices. MXN finally started to see a stabilization between 1996 and 1998, once the Mexican government had enacted banking rescue packages to prevent further collapse, resulting in state control over a large majority of the Mexican financial sector, which led to a renewed growth in the economy that saw more stability by the turn of the millennium.
Subsequent exchange rates
- Following the revaluation in 1993, the official exchange rate was MXN$3 against the U.S. dollar.
- After the Mexican peso crisis of December 1994, the peso sharply depreciated from MXN$3.4 to MXN$7.2 in 1995.
- It then traded between MXN$8 and MXN$11 from 1998 to 2008, depreciated to MXN$15.56 in March 2009 due to the 2008 financial crisis before appreciating to MXN$12–MXN$14 in the early 2010s.
- The peso depreciated from MXN$14.78 in 2014 to MXN$17 in 2015.
- Since 2016 the peso has been trading between MXN$17 and MXN$21, but sometimes it deviated outside of this range.
- Amidst the COVID-19 pandemic, it depreciated to its all-time low of MXN$25 per dollar.
- From 2020 to 2024, it appreciated by over 30%, reaching a near nine-year high of MXN$16.31 per dollar in April 2024. This was mostly attributed to the growth of "near-shoring" strategies, growing foreign investment, as well as the strict monetary policy adopted by the Bank of Mexico in attempts to curb inflation following the COVID pandemic and the Russian Invasion of Ukraine.
Coins
Real
Coins issued from the 16th to 19th centuries under the Spanish American system of reales and escudos included
- in gold: 1⁄2, 1, 2, 4 and 8 escudos, with 1 escudo ≈ 2 pesos or 16 reales.
- in silver: 1⁄2, 1, 2, 4 and 8 reales, with 1 peso = 8 reales.