Mexico Energy Law Makes Peso Latin America’s Best 2013 Currency

Mexico’s peso closed 2013 as Latin America’s best-performing major currency after lawmakers approved legal changes for the energy, financial and telecommunications industries to bolster economic growth.

The currency advanced 0.3 percent to 13.0367 per dollar today, paring its loss this year against the dollar to 1.4 percent. That compares with a 13 percent slide for Brazil’s real and is the least among the region’s seven major currencies.

A yearlong legislative push from President Enrique Pena Nieto culminated with a bill approved this month to open the nation’s energy industry to more private investment, prompting Standard & Poor’s to raise the country’s credit rating one step to BBB+, the third-lowest investment grade. The government estimated an energy overhaul will lift economic growth by 1 percentage point by 2018.

The peso’s performance “highlights the fundamentals of the country,” Eduardo Rodriguez, a trader at Casa de Bolsa Finamex SAB, said in a telephone interview from Guadalajara, Mexico. “The reforms, in combination with the recovery in the U.S. that’s already being felt, will drive the economy, and the peso little by little will reach levels more in line with its fundamentals.”

In addition to the law that ends Petroleos Mexicanos’s 75-year production monopoly and will allow for companies such as Exxon Mobil Corp. and Chevron Corp. to develop crude, Pena Nieto shepherded through at least 10 constitutional amendments in his first year in office. The changes included legislation to curb the market power of dominant telecommunications companies, such as billionaire Carlos Slim’s America Movil SAB.

Growth Outlook

While analysts surveyed by Bloomberg are projecting that Latin America’s second-biggest economy will expand by 1.3 percent in 2013, they forecast that Mexico’s gross domestic product will grow by 3.47 percent in 2014 and 3.9 percent in 2015.

Analysts surveyed by Bloomberg project that the peso will strengthen 0.3 percent to 13 per dollar by the end of March, according to the median forecast of economists surveyed by Bloomberg. Finamex’s Rodriguez said the peso may reach 12.5 per dollar.

Yields on fixed-rate peso bonds due 2024 was little changed at 6.44 percent, according to data compiled by Bloomberg. The yields rose 1.02 percentage point this year, the biggest increase since the debt was issued in 2005.

To contact the reporter on this story: Ben Bain in Mexico City at bbain2@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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