When I was living and working in the United States – a time I jokingly refer to as LBM (Life Before Mexico) – I was recognized as an expert in counterfeit documents and passports. I would occasionally be invited to speak at conferences or to conduct training for individual police agencies.
I began each class or presentation by asking everyone in attendance to raise their hand if they had ever traveled outside the country. The classes varied in size from around 20 for a classroom to over 300 for the larger venues. In each case, the number of people with their hands up was less than 30%. When I excluded a quick trip to Canada or a cruise, the number dropped to less than 10%.
You might be asking yourself what that has to do with the exchange rate between the U.S. dollar (USD) and the Mexican peso (MXN). Although it doesn’t affect the actual rate, it does impact how many Americans take advantage of it – or fail to.
The fact is that most Americans don’t follow foreign exchange rates unless they are investors or planning a trip abroad. Even then, many just don’t understand the significance of the numbers they’re looking at.
Here’s an example:
A friend of mine was planning to visit us in Mexico and he asked about exchanging his U.S. dollars for pesos. I told him what the exchange rate was in our area – I believe it was about 17 MXN to 1 USD at the time—and told him to check with his bank to see if they offered a better rate.
My friend then asked, “So, my one U.S. dollar is like 17 dollars there?”
“No, it doesn’t work like that,” I responded. “If it did, I would head down to Colombia where the exchange rate is about 3000 Colombian pesos to 1 USD. Then I could buy a nice house for $100 USD.”
I was obviously joking but he got the point. He just shook his head and said, “I really don’t understand how the whole exchange thing works.”
It’s important to think of exchange rates in terms of relative buying power. In other words, it’s useful to compare what an item cost you in your own currency at an earlier exchange rate and what the same item costs you now.
Here is a quick example:
Less than two years ago on January 17, 2015, the exchange rate was 14.55 MXN to 1 USD. Today, the exchange rate is 20.63 MXN to 1 USD.
Let’s see how the change affects the relative cost of three items here in Mexico using the exchange rates shown above:
Mini Split Air Conditioner $5,439 MXN: Jan 2015 price $373.81 USD; current price $263.64 USD
Sofa $11,199 MXN: Jan 2015 price $769.69 USD; current price $542.85 USD
Milk $15 pesos: Jan 2015 price $1.03; current price $0.75 USD
As you can see, the savings is huge. It applies to everything that you spend money on from monthly utility bills to buying property.
Let’s Wrap This Up
Since our monthly income is in U.S. dollars, the exchange rate is very important to us and we follow it closely. Every time the dollar gets stronger, our already low monthly expenses get even lower. We take exchange rates into account when deciding whether to make large purchases or transfer money to Mexico.
If you’re an American and you’ve been waiting for the right time to invest in a property in Mexico or move here – this is it. Your dollar is at an all time high against the peso. These conditions won’t last forever, so I wouldn’t dawdle too long if I were you.
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