Why Mexico's Peso Reminds Commerzbank of a London Soccer Club

Updated on
  • Peso is `great on paper, poor in practice,' just like Chelsea
  • Currency is Latin America's worst-performing so far this year

Whether talking about the U.K’s Premier League 2015 champion or the Mexico peso, Commerzbank AG’s assessment is the same: They have everything going for them, but they’re still being beat by peers.

“The peso is fast becoming the Chelsea F.C. of the EM currency universe: great on paper, poor in practice,” Peter Kinsella, the bank’s head of emerging-markets currency research, wrote in a note to clients on Thursday.

At first glance, the peso looks to be a strong bet among emerging markets: Mexico’s economy is the most robust among the region’s major economies. Gross domestic product is forecast to grow 2.8 percent this year, faster than Chile, Colombia, Argentina, Brazil or Venezuela. And inflation is under control. And yet, it’s tumbled 7 percent to record lows in the first three weeks of the year, making it Latin America’s worst performer.

London soccer club Chelsea, winner of last year’s Premier League title, is in a similar rut. It boasts an expensive squad of international stars, but has suffered a string of losses that pushes it ever closer to the humiliating relegation zone.

The peso gained 0.4 percent to 18.4551 per dollar as of 11:40 a.m. in Mexico City, paring its decline over the past year to 20 percent. The central bank has reacted to the selloff by auctioning dollars, a “futile” effort in today’s risk-averse environment, Kinsella said.

The research analyst’s analogy only goes so far. Chelsea sacked its mercurial manager Jose Mourinho in December. Mexican Central Bank President Agustin Carstens probably doesn’t have to worry about his job.

— With assistance by Jose Enrique Arrioja

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