Valley residents worry as value of peso drops

MCALLEN, Texas (ValleyCentral) — The stock market meltdown earlier this week has prompted fears of recession worldwide.

Mexico is one of the countries feeling the biggest impact due to trouble on Wall Street. The value of the Mexican Peso has now dropped to almost 20 per U.S. dollar.

The U.S. dollar is going a long way in Mexico.

Although that is good news for tourists heading into Tamaulipas, shoppers like Carina Alvarez who crosses into the U.S., say they are worried about the instability of the peso.

"For the purchases, because later when we come to buy dollars, everything will be more expensive when spending here," Alvarez said.

She believes prices rise in Mexico whenever the value of the dollar increases.

Others like Jorge Gutierrez, who lives in McAllen but has family in Reynosa, say this is a good thing. He believes his family will now be able to have more spending money with the dollars he sends back home.

"It benefits the people in Mexico because prices don’t go up over there," Gutierrez said. "As long as we have money and send it there, we feel that the economy is stabilizing in Mexico since they will now have more to spend."

Jorge Sanchez, Vice President of Economic Development for the McAllen Chamber of Commerce, says this will not stop Mexican citizens from coming to the Valley.

However, their purchasing power may be impacted.

“Since a dollar will be more expensive than around ten percent is their increase of real cost at the end of the day," Sanchez said.

Several money exchange businesses we spoke to say they have seen a decline in people trading dollars but were prepared as worldwide markets started failing.

The University of Texas Rio Grande Valley Economics Professor Armando Lopez-Velasco says the bad July jobs report and recession fears are causing the depreciation of the peso and there is no timeline to know when the dip will end.

“You have this uncertainty about whether we are going to have a recession in the U.S. or not, you also have the political uncertainty, both in the U.S. and Mexico, and the only thing we can really focus on is that there is going to be a lot of volatility," Lopez-Velasco said.

Lopez-Velasco also says the peso’s drop is correlated with the government transitions happening both in the United States and Mexico. He says once the political figures are set, then markets might stabilize once again.