Regional Trading Agreements
Historial Exchange Rate Regime of Asian Countries
 
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  Untitled Document
Mexico
  The currency of Mexico was the Mexican Peso (Mex$). The Banco de Mexico (Bank of Mexico, BOM) together with the Secretariat of Finance and Public Credit (SHCP) administered all currency matters, including the exchange control system. The intervention currency was U.S. Dollar. There were no taxes or subsidies on purchases or sales of foreign exchange, and banks were freely engaged in exchange transactions between the peso and any other currency.

From 1954, the Official Rate of Mexican Peso was set at Mex$12.50 per U.S. Dollar. Mexico maintained a fixed peso-dollar exchange rate even after the collapse of the Bretton Woods system in 1971 and the world oil price shock in 1973. However, the distortions caused by import substitution policies, the public expenditure-led growth financed mainly by borrowing from the BOM, the accumulation of foreign debt, high inflation, the overvaluation of the peso, and a large capital flight led finally to the devaluation of the peso in 1976. This basically ended the regime of fixed exchange rates. The Peso switched to the managed floating exchange rates in 1976, which gave more flexibility for discretionary economic policy (Li). The exchange rates were determined largely on the basis of demand and supply conditions in the exchange markets. However, the authorities intervened when necessary to maintain orderly conditions in the exchange market.

In August 1982, the Effective Rate was abolished. There were two exchange markets (the controlled market and the free market), with 2 Preferential Rate and Free Market Rate. The exchange rate in the controlled market was adjusted daily, based on the differential between the rates of inflation expected in Mexico and its main trading partners and other indicators. A week later, MexDollar rate was also introduced to form three-tier exchange market. However, this rate was abolished in September. In the same month, the Free Market Rate was changed to Ordinary Rate.


At the end of 1982, the Ordinary Rate converted to Free Market Rate again and a Special Rate was introduced. However, the Special Rate was abolished in March 1983. In July 1985, a Super Free Market Rate replaced the Official Free Market Rate and the nationalized commercial banks were allowed to deal the transactions closer to black market rate.


In the following years, the exchange rate of Mexican Peso depreciated continuously. At the end of 1991, the Controlled Rate and Super Free Market Rate were unified into Official Rate while the Controlled Exchange Market was eliminated. Started from the end of 1994, a floating rate policy was maintained by the government, with BOM intervening in the foreign exchange market under exceptional circumstances to minimize volatility and ensure an orderly market.


Major sources of reference include:
1) World Currency Yearbook (WCY)
2) IMF Annual Report on Exchange Arrangement and Exchange Restriction (IMF)
3) Li, Carmen A., Apostolis Philippopoulos and Elias Tzavalis. 2000. Inflation and Exchange Rate Regimes in Mexico. Review of Development Economics, 4(1), 87-100. (Li)

   
 
Date
Changes to the exchange rate regime
Mexican Peso per U.S. dollar
19 April 1954The Mexican Peso (Mex$) was devaluated from an Official Rate of Mex$8.65 to Mex$12.50 per U.S. Dollar. (WCY 1984, p.513)  
15 August 1971Following the floating of the U.S. Dollar, the Peso maintained its links to the American unit, thus effecting devaluation. (WCY 1984, p.513)  
22 December 1971The gold content of the currency was reduced 7.89%, paralleling the U.S. Dollar devaluation and thereby retaining the Official Rate at Mex$12.5 per U.S. Dollar. (WCY 1984, p.513)  
13 February 1973Following the devaluation of the U.S. Dollar, the gold content of the Mexican Peso was reduced 10%, thus maintaining the Official Rate unchanged at Mex$12.50 per U.S. Dollar. (WCY 1984, p.513)  
31 August 1976The Peso was devaluated, as the unit was placed on a controlled, floating basis creating an Effective Rate as well as a Free Market Rate at the exchange houses. (WCY 1984, p.513)  
1 September 1976The Mexican Peso ceased to be pegged to the U.S. Dollar at Mex$12.50=US$1 and was allowed to float. The BOM set its initial intervention rates at Mex$20.40 buying, and Mex$20.60 selling, respectively, per U.S. Dollar. It was announced that no exchange controls would be introduced and the Central Bank would intervene in the exchange market to prevent speculative fluctuations. (IMF 1977, p.317)  
13 September 1976The BOM, without abandoning its policy of managed floating, announced a tentative quotation for the U.S. Dollar of Mex$19.70 buying and Mex$19.90 selling, respectively, per U.S. Dollar. (IMF 1977, p.317)  
26 October 1976The BOM announced that, with effect from October 27th, it would not be necessarily intervene in the exchange market to maintain the exchange rate within the limits of Mex$19.70 buying and Mex$19.90 selling, respectively, per U.S. Dollar. Banking institutions were required to observe daily a spread of at most 1% between their average buying and selling rates. They were also required to maintain normal foreign exchange positions and to report to the BOM their foreign currency assets and liabilities on a daily basis. (IMF 1977, p.317)  
27 October 1976The BOM quoted new rates for the U.S. Dollar of Mex$26.24 buying and Mex$26.50 selling, respectively, per U.S. Dollar. (IMF 1977, p.318)   
December 1976 19.950 
April 1977Two minor foreign exchange values were created. A Foreign Debt Rate of Mex$21.875 per U.S. Dollar for public foreign debt repayment and an Interest Tax Rate of Mex$22.475 per U.S. Dollar for the withholding tax on bank interest earned by Foreign Currency Accounts. (WCY 1985, p.563)  
December 1977 22.740 
December 1978 22.720 
December 1979 22.800 
December 1980 23.260 
December 1981 26.230 
18 February 1982The Peso was left to float freely in exchange markets before the Central Bank intervention was resumed on June 5th with a controlled float. (WCY 1984, p.513)  
5 June 1982The BOM announced that it would intervene again in the foreign exchange market, and a policy was adopted to allow the Peso to continue its depreciation at a rate of Mex$0.04 per U.S. Dollar a day. (IMF 1983, p.323)  
5 August 1982A two-tier exchange market (the controlled market and the free market) for the Peso was established, with a Preferential Rate of Mex$49.50 per U.S. Dollar made applicable to priority imports, conversion of petroleum export proceeds and foreign debt payments. A floating Official Free Market Rate was introduced, set initially at about Mex$70.00 per U.S. Dollar for all other transactions. (WCY 1984, p.513)  
6 August 1982The Peso closed at Mex$49.13 in the preferential market and Mex$76.33 per U.S. Dollar in the floating market. (WCY 1984, p.513)  
13 August 1982All Foreign Currency Accounts in Mexican banks were frozen and their conversion limited to Mexican Pesos at Mex$69.50 per U.S. Dollar, the so-called MexDollar Rate, which was also made applicable to liquidation of maturing "Petrobonds", thus creating a three-tier exchange rate system. (WCY 1984, p.513)  
19 August 1982The foreign exchange market was re-opened, and banks were authorized to buy and sell foreign currencies at a free market rate. (IMF 1983, p.324)  
1 September 1982Foreign exchange controls were decreed and two basic exchange rates were to operate, the Preferential Rate and the Ordinary Rate which was applicable to all transactions not covered by Preferential Rate.

The MexDollar was abolished. (WCY 1984, p.513) 

 
6 September 1982The Free Market Rate was changed to Ordinary Rate. (WCY 1984, p.521)

The Preferential Rate and Ordinary Rate were announced, at Mex$50 and Mex$70 respectively, per U.S. Dollar. (IMF 1983, p.324) 

 
3 November 1982The Peso was again devalued via the creation of a floating Official Free Market Rate applicable within a special free zone along the United States border. (WCY 1984, p.513)

The authorities announced the establishment of a new exchange market in the border areas and free trade zones. The exchange rate was to be determined by supply and demand conditions in the area. Sales of foreign exchange could be effected by local or foreign residents, but purchases were restricted to individuals and enterprises residing in the border areas. (IMF 1983, p.324) 

 
December 1982 149.250 
20 December 1982The Ordinary Rate was changed to Free Market Rate. (WCY 1984, p.521)

A new exchange rate structure came into operation. A Controlled Preferential Rate (Controlled Rate) initially at Mex$95.00/95.10 (buying and selling) per U.S. Dollar was made applicable to all export proceeds, essential imports and the servicing of some foreign debts. A Free Market Rate at Mex$148.50/150.00 (buying and selling) per U.S. Dollar was created for all other transactions. Both rates were periodically revised. (WCY 1984, p.513)

The MexDollar Rate became the Special Rate initially at Mex$70.00 per U.S. Dollar and depreciated 13 Centavos (Centavos = 1/100 Peso) daily. (WCY 1985, p.563) 

 
3 January 1983The BOM announced that the Controlled Rate was applicable to all obligations in foreign currency with respect to debt contracted prior to 20 December 1982 and negotiable in Mexico, provided that such obligations were in the form of liabilities to Mexican banks for export-related financing. (IMF 1984, p.332)  
16 March 1983The Preferential Rate was made applicable to the conversion of MexDollar, thus abolishing the Special Rate. (WCY 1985, p.563)  
6 April 1983A Debt Rescheduling Rate was created for the forward purchase of foreign currency to cover private debt repayments provided a rescheduling of at least six years and a three-year grace period was arranged. The rate was to be subsidized and announced the extent of the terms. (WCY 1985, p.563-564)   
23 September 1983The Official Free Market Rate became subject to a daily depreciation of 13 Centavos (i.e. Mex$0.13 per U.S. Dollar). (WCY 1985, p.564)   
December 1983 161.350 
27 January 1984The Secretariat of Commerce and Industrial Promotion announced that all items subject to import duty would be eligible for imports under the Controlled Rate. Settlements for related foreign payments, as well as conversion of credits obtained from foreign suppliers, would also be effected at the Controlled Rates; but temporary imports would be eligible for this provision only under special authorization. (IMF 1985, p.343)   
December 1984 206.970 
6 December 1984The Controlled Preferential Rate and the Official Free Market Rate were depreciated 17 Centavos daily (i.e. Mex$0.17 per U.S. Dollar). (WCY 1985, p.564)   
6 March 1985The Controlled Preferential Rate and the Official Free Market Rate were depreciated 21 Centavos daily (i.e. Mex$0.21 per U.S. Dollar). (WCY 1985, p.564)   
11 July 1985The Official Free Market Rate was replaced by a Super Free market Rate as the nationalized commercial banks were allowed to deal closer to the street or black market rate. Tourists were allowed to avail themselves of this rate. (WCY 1986/87, p.326)   
25 July 1985The Controlled Preferential Rate was devalued 16.7%, changed from Mex$233.1 to Mex$279.7 per U.S. Dollar. (IMF 1986, p.363)   
5 August 1985A system of managed floating of the Mexico Peso in the controlled market came into effect, with daily fixing sessions. The 21 Centavo daily depreciation being abolished. At the same time, the Controlled Preferential Rate was split into two categories, the Equilibrium Rate that was set each day (managed float) and the Retail Rate that was negotiated between participants and the bank. (WCY 1988/89, p.330-331)   
December 1985 450.750 
December 1986 914.500 
5 January 1987The BOM began to operate a short-term foreign exchange risk coverage market through which commercial and financial operations were covered against exchange rate fluctuations. The scheme applied only to the U.S. Dollar, and the coverage was based on the equilibrium exchange rate prevailing on the date of contract. (IMF 1990, p.315)  
18 November 1987The BOM ceased intervention in the free exchange market. (IMF 1988, p.341)   
December 1987 2,245.000 
14 December 1987The Controlled Preferential Rate was depreciated by 17.4%, reducing the spread between the exchange rates in the controlled and free exchange market to about 1.5%. (IMF 1988, p.341)   
February 1988For the month of February 1988 only, the Controlled Preferential Rate was devalued Mex$3.00 per day against the U.S. Dollar. During the remainder of the year, the rate was frozen at Mex$2,281 per U.S. Dollar. (WCY 1988/89, p.331)   
1 March 1988The Government undertook to fix the exchange rate for the U.S. Dollar for a period of three months, within the context of the anti-inflation pact. The period of the fixed rate was subsequently extended through the end of the year. (IMF 1989, p.322)  
December 1988 2,295.000 
1 January 1989The rules governing the establishment of the Peso's exchange rate were modified, whereby it would be depreciated daily against the U.S. Dollar by preannounced fixed amounts of Mex$1.00. (IMF 1990, p.318)  
31 August 1989Loans from international financial organizations were transacted at the controlled exchange market rate. (IMF 1990, p.318)  
December 1989 2,679.500 
28 May 1990The rules governing the establishment of the exchange rate of the Peso were modified, whereby the rate would be depreciated daily against the U.S. Dollar by the preannounced amount of Mex$0.80. (WCY 1990/93, p.327)   
12 November 1990The rules governing the establishment of the exchange rate of the Peso were modified, whereby the rate would be depreciated daily against the U.S. Dollar by the preannounced amount of Mex$0.40. (WCY 1990/93, p.327)   
27 November 1990The foreign exchange risk coverage was extended for transactions up to one year. (IMF 1991, p.321)  
December 1990 2,941.900 
11 November 1991The dual exchange rates (Controlled Rate and Super Free Market Rate) were unified into Official Rate. A band within which the market rate would fluctuate was defined, and the daily rate of depreciation of the Peso against the Dollar was reduced to Mex$0.20 from Mex$0.40 (i.e. from an annual rate of 5% to 2.4%)

In addition, the differential between intervention points was widened to 60 Pesos from 35 Pesos. While the selling rate would be depreciated by Mex$0.20 daily, the buying rate would remain fixed until 15 March 1992, and begin to be depreciated subsequently at the same rate.

The Controlled Exchange Rate Market was eliminated and all controls on exchange transactions were abolished. (IMF 1992, p.319) 

 
December 1991 3,071.000 
20 October 1992The maximum selling rate was depreciated daily against the U.S. Dollar by Mex$0.20, and the minimum buying rate was held constant. (IMF 1993, p.333)  
1 January 1993The new Mexican Peso was introduced. One new Peso would be equivalent to 1000 of the former Mexican Pesos. (IMF 1993, p.335)  
20 December 1994The upper limit of the exchange rate band was raised to Mex$3.99 per U.S. Dollar, representing a devaluation of 15%. (IMF 1995, p.326)  
22 December 1994The external value of New Mexican Peso was determined in the interbank market on the basis of supply and demand conditions. The Peso was allowed to float, and the exchange regime based on the crawling peg was abandoned. (IMF 1995, p.325-326)  
31 December 1994The exchange rate for the U.S. Dollar was Mex$5.325 per U.S. Dollar. (IMF 1995, p.325)  
17 March 1995An over-the-counter market in forward and options in foreign exchange was introduced. (IMF 1996, p.320)  
April 1995The Chicago Mercantile Exchange started trading futures contracts on the Peso. (IMF 1996, p.318)  
31 December 1995The exchange rate for the U.S. Dollar was Mex$7.6425 per U.S. Dollar. (IMF 1996, p.318)  
31 December 1995The exchange rate for the U.S. Dollar was Mex$7.6425 per U.S. Dollar. (IMF 1996, p.318)  
1 August 1996The BOM introduced a scheme to purchase foreign exchange from the market without abandoning the commitment to the floating rate system. Under the scheme, the BOM holds monthly auctions of option up to $130 million, giving financial institutions the right to sell U.S. Dollars to the BOM in exchange for Mexican Pesos. The options, which are valid for a 1-month period, can be exercised at the discretion of the holders, provided that the rate of exchange is no more depreciated than the average rate over the preceding 20 working days. (IMF 1998, p.591)  
27 August 1996The BOM increased the amount of options auctions to $200 million. (IMF 1998, p.591)  
27 December 1996The BOM increased the amount of options auctions to $300 million. (IMF 1998, p.591)  
19 February 1997Two modifications to the exchange rate system were introduced. First, the BOM doubled the potential amount of options auctioned each month to $600 million. If 80% ($240 million out of $300 million maximum) of the options to sell U.S. Dollars to the BOM was exercised within the first 15 days of the month, the BOM would conduct a second auction of options for the same amount auctioned. Second, the BOM also announced that it would be prepared to auction (sell) up to $200 million a day in the foreign market, but would accept only those bids that were at least 2% more depreciated (in terms of Mexican Pesos per U.S. Dollar) than fix of the previous day. (IMF 1998, p.597)   
30 July 1997The BOM increased the amount of options auctions to $500 million. (IMF 1998, p.591)  
29 September 1997The BOM reduced the amount of options auctions to $400 million. (IMF 1998, p.591)  
30 October 1997The BOM decreased the amount of options auctions to $250 million. (IMF 1998, p.591)  
16 March 1998The BOM permitted commercial banks to enter into futures and options transactions referred to any kind of domestic or foreign government securities, real interest rates and swaps. (IMF 1999, p.575)  
27 August 1998The BOM modified its dollar auction mechanism so that up to three auctions may be held in the same day, instead of only one, for an aggregate amount of $200 million a day. (IMF 1999, p.575)  
14 December 1998The Mexican Derivatives Exchange was included as a recognized market in which commercial banks could enter into futures or options transactions. (IMF 1999, p.576)   
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