The American dollar is “heading north” of 18 pesos (no pun intended). This is great for Americans living in Mexico. But, is it good for the Mexicans whose businesses we patronize?
Here’s just one example…
There’s a little hole-in-the-wall (really…see the picture) panaderia, or bakery, around the corner from where I live. Its proximity makes it difficult for me to stay on a diet. Six days a week, José Maria and his wife bake a selection of breads, rolls, and sweets. There’s plump bolillos (rolls), biscuits, donuts, cinnamon rolls, muffins, and cookies. They supply the little corner stores, abarrotes, in San Antonio. They also have a small shop in the front of the bakery where they sell at retail. There you can buy whatever is available for 4.5 pesos each (about $.25).
José Maria and I have briefly talked several times. Once I remarked about his large selection of items. He looked over his shelf and agreed. “Making them is the easy part,” he shared. “Selling them is difficult.” He’s a good baker, and his selection keeps growing. Once people discover his place, I can’t imagine that being a problem.
Since that conversation, I’ve seen him walking down the street to Jesus’ little store or Laura’s Superette with a tray piled high with baked goods. Or he might be driving his car to stores farther away with a pastry-filled back seat.
Last week I was curious about how the increase in the dollar was affecting him. I asked him about the ingredients he used. “Where do you get your wheat,” I asked him.
“About half of it comes from the United States,” he answered. The other half comes from Mexico. The stuff from Mexico is better,” he chided.
“So, have your prices for ingredients gone up,” I continued. His expression became more serious.
“They haven’t gone up yet,” he explained. “But they will.”
When you understand that his market is local working people, you realize why he’s concerned. 4.5 pesos doesn’t seem like much. However, a house cleaner makes only 50 pesos ($3) an hour. Laborers don’t make much more. There’s a guy who will wash your car while you shop up the street for 35-40 pesos. At some point, José Maria will have to raise his prices to keep up. And, his customers will have to pay more.
I wrote about the rise of the dollar back in December. Back then the dollar had appreciated 10.6% in the short time I was here. The recent exchange rate means that, in 11 months, the dollar has risen about 40%. Yikes!
I usually don’t pay much attention to the prices in the markets and stores. I eat out a lot, so I pay attention to menu prices. In December, I discussed the rise in the price of a steak at one restaurant that was tracking right along with the dollar. As its price increased in pesos, the cost of the steak stayed at $9.52US. This past spring, that same steak had risen from 119 pesos to 179 pesos, costing 50% more in pesos. Meanwhile, today that steak costs me $10.22 or about 7% more.
The restaurant appears to be doing well. There’s no shortage of middle class Mexicans frequenting it. Someone’s doing well in Mexico! While the Canadian dollar has been relatively stable against the peso, some Canadians I know are starting to complain. They buy their airplane tickets in U.S. dollars, some pay their rent in U.S. dollars, and it’s more expensive to buy a steak at that restaurant. It will be interesting to see if fewer Canadian snowbirds make the trek down here (and Florida too) this winter.
One thing is for sure. The dollar won’t stay up forever. You know what they say: What goes up…
If the doom-sayers are correct, the dollar may have a hard fall at some point in the not-so-distant future. Then the Americans among us down here on fixed incomes and meager savings will feel the pinch.
Until then, let them eat steak!