Mexico turns to IMF for financial help
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The Mexican peso rallied today to its strongest level against the dollar in two weeks, after President Felipe Calderon said the country was ready to use a credit line of as much as $40 billion from the International Monetary Fund to bolster its finances.
Mexico has been spending its foreign reserves to defend the peso, which sank this quarter to a record low on concerns about the toll the global recession is taking on the Mexican economy.
From Bloomberg News:
Calderon, speaking in London today, said Mexico is ready to draw between $30 billion and $40 billion from the IMF. The IMF last week disclosed a plan to relax loan conditions for emerging nations that need short-term assistance. Use of the credit line may give the central bank ‘more firepower to stabilize the peso,’ said Gabriel Casillas, a UBS AG economist in Mexico City. ‘This could make market participants’ concerns about Mexico’s foreign reserves vanish completely.’
The peso has strengthened to 14.14 per dollar from 14.29 on Monday and 14.35 on Friday. The peso hit a record low of 15.57 per dollar on March 9.
The Mexican stock market also is rallying today, suggesting that investors don’t view the IMF help as a desperation move on Calderon’s part. The IPC index was up 1.6% to 19,838 at about 11:10 a.m. PDT amid a global rebound in share prices.
The Mexican market is down 11.4% year to date, slightly worse than the 11% decline in the U.S. Standard & Poor’s 500 index.
-- Tom Petruno