Money exchange question

Wow. I'm glad to see I'm not the only one who doesn't know the answer to this.

20 views so far, and I guess it's a common problem.

If you want to buy something from Mexico, it is in your favor to have a high dollar. If you want to sell something to someone in Mexico, a high dollar is bad because it makes your product more expensive compared to competitors from other countries.

A strong dollar keeps inflation low because foreign goods are cheaper, but hurts US exports.

Yes, I've read things like this, but I am confused as to what is meant by "high dollar"

As in my example,

"For instance, today the exchange rate is 1 USD equals 19.12 pesos.

For it be better for me as someone who earns their money in dollars if the exchange rate next week was 1 USD equals 18 pesos, or 1 USD equals 20 pesos?"

Which one would it be?

Depends. If you're going on holiday to Mexico the 20 peso rate is best, but if you're selling stuff in dollars on ebay to Mexicans the 18 rate is better.

I'm surprised that the peso is so weak. When I traveled to Mexico in the 1970s, the exchange rate was 12 1/2 peso to the dollar, and we thought that was a good deal. Once you're in a country, it's best to be able to think in their currency. The one very long trip we made there, in 1974, we did price comparisons to determine what stores we would patronize. In areas where American tourists were expected, prices were always higher, so we avoided those places. We subsisted mostly on canned goods we bought in local stores.

To me I would go with the US dollar simply that it is more stable. The more a currency fluctuates the more risky it is. If it moves in one direction it might help you, but if moves the opposite you could lose money. Seeing you are not trying to beat the market but instead to get a paycheck - you would want the least risk possible.

You are earning dollars and spending pesos, so the more pesos you can get
for your dollar, the better it is for you. Discounting the cost of exchanging
money, if you buy a 20-peso item when the dollar is worth 20 pesos, you
paid a dollar for it. If you buy it when the dollar is worth 18 pesos, you paid
$1.11 for it.

Not as much as Donald Trump.

you're earning in dollars, spending in pesos?

in that case, the more pesos per dollar, the better for you as a consumer

___

as a shopper using pesos that you exchanged from dollars, you want more pesos per dollar as the exchange rate

high dollar = strong dollar = more pesos per dollar

In terms of consumption, the more pesos per dollar, the better.

Thank you George, ehBeth and Infrablue. This is exactly what I needed to know.

So if next month a usd dollar is worth ket’s say 30 pesos, I would have a lot more buying power with the money I have in the bank down there, which I had deposited in the form of dollars.

For those who hadn’t followed a Mexico thread I started, I had bought a house in San Miguel de Allende last November, in 2017. So I have a bank account there, and whenever I go I deposit an American check in the account, to pay the property manager, who takes care of all the bills, plus at this point projects I’m still working on for the house. At some point I won’t need the property manager as those projects will be done, or when I move there. Then I will just go ahead and pay for things like electric, the phone/cable for a year in advance. I’m meeting locals who can recommend handymen.

The contract I have with the PM is $125 usd a month. Each month when I get the statement, the peso amount that was withdrawn varies within a range of about 100 to 150 pesos a month, depending on the exchange. Without the PM fee the house literally costs about $100 a month to run. The electric bill is like $4 a month to run the refrigerator. No a/c needed ever. If I’m there it jumps another few dollars because lights/ washer/dryer. LOL

do you have a $US account there or were the funds converted into pesos when you deposited them?

It's a Mexican account, so the value of the American dollars would depend on the value on the day I deposited it, which varies. I take out pesos from the ATM as I need it.

I don't believe you can get an account that stays in American dollars. That would be cumbersome, because you couldn't spend it, and would always be exchanging.

Like when I go there in about a week and a half, I'm going to deposit $2000 American. So forever more my bang for my buck will depend on what it was on that date.

When I take my Social Security at age 62, let's say I'm living there then. I will let the money deposit into my American bank account, and will go deposit a check in dollars into the Mexican account, and be converted to pesos. Sure, the value would fluctuate from month to month, but it's not like that's going to keep you from buying what you need/want.

Fresh food like eggs, veg, fruit a lot of meats, that you would buy from the supermarket, are very inexpensive, and high quality as they are more local.

A lot of gringos vacation there, and in the restaurants they tend to go to the prices are higher, but still not high by US standards.

The reason I mention all that is if you were vacationing here, you might be more concerned about the exchange, as you would be paying for hotels, restaurants, entertainment in higher priced amounts. If you come to hang out, rest, zone out etc. the cost for everyday purchases are low. The locals don't make a lot of money, so prices stay the same because that's what the economy will bear.

I used to work for an international bank. All its foreign currency accounts were held with banks in foreign countries.

At the time a bank couldn't have a foreign currency account outside the country in question.

US dollar accounts are fairly common here. If you go to a bank location with more than a couple of ATM's, there's a good chance one of them will be for US dollar accounts (or accessing your regular account and getting US funds).

If I could have a US dollar account in Mexico, it would be my preference so I could take advantage of those fluctuations. I wouldn't want to put too much of my money into pesos in advance.

Do you have the ability to easily transfer money between your US and Mexican accounts on a regular basis? Without a US dollar account in Mexico, that would be my next choice. I'd keep my US funds in US dollars as long as possible.

To transfer money from the US bank from the Mexico bank involves a transfer which is cumbersome, involves going to the bank in person, and involves a fee that would more than negate any benefits of transfering the maximum limit you can do. If you were transfering a smallish amount, let's say a couple of thousand, you would lose money on the U.S. side, not even counting if the fluctuations are in your favor.

I'm sure for large companies it's advantageous, but for an average person, any potential savings is hardly worth it.

This is where being an American shows. I really don't care if in the conversion of buying a shirt or bottle of detergent or something ends up costing me 10 or 20 or 50 cents usd more. Because in the big picture, everything costs so much less. In the course of running around in a typical day, you end up tipping various people 5 or 10 pesos here and there for really small things, like bagging your groceries, or "helping" you back out of your parking space, or pumping gas. For me, it's a quarter. Change sitting in the coffee holder in the car. For the kid who bags your groceries, it's money he or she brings home to their mother, who spends it on food.

Yeah, on paper it seems you would be interested in transferring money at the exact right time. However in practice for day to day items it's not worth thinking about. Now, if it were a bigger ticket item, I compare.

Honestly, it shocks me more that people in the States go out for lunch at work and spend $10 for a burger, fries and soda. For junk.

Re my original question, although I'm really thankful for the answer, and now have it straight, in practice it's really all academic. While there, I still have to buy gas, food. Where the big savings come in is the price of things like car insurance, property taxes, medical insurance, all of which cost like $300 to $400 usd a year. That's right. My property taxes on a brand new, 1400 square foot house with a roof top terrace, in a gated neighborhood is less than $400 a year.

This is basically what I see from my rooftop....

Crap, I just realized. In the picture above, the straight cactus plant that's sitting in the corner of the terrace? The building right above it with the slanted pergola is mine.