Mexico Devalues Peso 20%

The government said Wednesday that it will immediately devalue the peso by 20% as part of a package of measures designed to shore up the sagging economy and calm the chaotic exchange markets.

Finance Minister Jesus Silva Herzog told a news conference that the value of the peso used for the majority of commercial transactions will be reduced to about 280 pesos to the U.S. dollar from Wednesday’s fixing of about 233 pesos to the dollar.

The government had earlier this month devalued the peso used in the tourist market.

The peso has fluctuated wildly in the past two months with its rate soaring to record levels against the dollar.

Private analysts say the fluctuations reflect Mexicans’ fears about the direction of the economy, battered by falling oil prices, weak demand for non-oil exports and high inflation.

In addition to devaluing the so-called controlled peso rate, Silva Herzog said the government will adjust the pace at which the value of the peso--used for commerce--is currently reduced daily in a measured devaluation.

The daily devaluation is now 21 centavos a day; there are 100 centavos in a peso.

Silva Herzog said the slide will go to what he called a “controlled float.” That is, the reduction will be made every day but not at the same amount.

The new daily slide will go into effect Aug. 5, he said.