By Zarafshan Shiraz, Bloomberg
The allure of Mexico as a prime vacation destination took the world by storm during the pandemic, drawing in throngs of tourists. However, a new factor has begun to impede this tourism boom – the so-called super peso, which is making trips to Latin America’s second-largest economy more expensive for international travelers. Here, we delve into the key questions surrounding the recent slowdown in Mexico’s tourism industry.
What is the Super Peso?
The super peso is a term used to describe the significant appreciation of Mexico’s currency, the peso, against the U.S. dollar. This surge in the peso’s value has resulted in increased travel costs for international visitors. In July, the peso recorded its seventh consecutive month of gains, marking the longest streak in 15 years. Although it lost some ground due to market volatility in late August, the peso remains one of the world’s strongest major currencies in 2023, with an 8.8% gain against the dollar.
How Has the Super Peso Affected Tourism?
The appreciation of the peso has led to a noticeable impact on Mexico’s tourism industry. The most crucial aspect to note is that the spike in travel costs has deterred international travelers. In August, during the high-season for summer holidays in the northern hemisphere, the number of foreign visitors to Mexico decreased by 1.5% compared to the previous year. This marked the first annual contraction since March 2021, according to the national statistics institute INEGI.
In stark contrast, the same period saw a surge in Mexicans traveling abroad, with a 26% increase. The super peso not only makes trips to Mexico more expensive for international tourists but also incentivizes Mexicans to opt for overseas destinations for their vacations.
The influence of the super peso extends beyond just affecting travel plans. The appreciation of the peso has resulted in a 7.2% reduction in total spending by international travelers in Mexico during August, as estimated by INEGI. Meanwhile, Mexican spending on international trips grew by almost 30%, highlighting robust consumer demand.
This surge in international travel by Mexicans underscores the country’s economic strength, as Latin America’s second-largest economy is projected to grow by 3.2% in 2023. This growth is not only driven by domestic factors but also influenced by the opportunities presented by the strong peso.
Mexico’s Unique Pandemic Experience
Mexico was unique among popular tourist destinations during the Covid-19 pandemic. Unlike many other countries that restricted or barred international tourists between 2020 and 2022, Mexico kept its doors open to visitors. This open-door policy benefited the country, particularly from travelers, mainly from the United States, who sought destinations where their mobility was less constrained.
In conclusion, the Mexico tourist spike stalls after super peso boosts travel costs, creating a complex landscape for the country’s tourism industry. While the super peso signifies economic strength, it poses challenges to the once-booming tourism sector. The future of Mexico’s tourism will depend on various factors, including how the currency performs and evolving global travel trends.
Implications of Mexico’s Tourism Plan Rescission on Local Economies
Mexico tourist spike stalls after super peso boosts travel costs
The August influx of foreign travelers to Mexico, usually a high season for summer vacations in the northern hemisphere, witnessed a notable decline of 1.5% compared to the previous year. This marks the initial annual contraction since March 2021, as reported by Mexico’s national statistics institute, INEGI. The impact of the surging peso on international travel costs became evident, raising questions about the future of Mexican tourism.
Why is the travel boom coming to a halt in Mexico?
The once-booming travel industry in Mexico, which propelled it to the forefront of global tourist destinations during the pandemic, is now facing a slowdown. This is primarily due to the peso’s increasing value, which results in higher travel costs for international visitors. Simultaneously, this trend is encouraging Mexicans to explore overseas options for their vacation, posing a question mark over the sustainability of Mexico’s tourism surge.
Why are tourists stalling in Mexico in August?
In the high-season month of August, traditionally favored for summer holidays in the northern hemisphere, Mexico experienced a surprising dip in the number of foreign travelers. Their arrivals dropped by 1.5% compared to the previous year, signifying the first annual decline since March 2021. This unsettling trend, as reported by Mexico’s national statistics institute, INEGI, is intrinsically linked to the appreciating peso, which has significantly increased travel costs, prompting a pause in Mexico’s tourist influx.
What happened to the’super peso’?
The ‘super peso’ experienced a sharp downturn due to its 24-hour liquidity, which left it vulnerable to a swift reversal of bets when investor sentiment towards risk turned negative. Consequently, it has lost approximately 2.7% of its value against the US dollar since attaining a five-year high on March 3. This remarkable fluctuation underscores the currency’s volatility in the face of market dynamics.
Why was Mexico’s Tourism Plan rescinded?
In May 2020, Mexico made the significant decision to rescind its tourism plan, with a primary aim to boost domestic tourism during the COVID-19 pandemic. The move was driven by mounting economic concerns for the country’s various tourist destinations. While CNN attempted to reach out to Mexico’s secretary of tourism for additional insights regarding the pandemic response’s impact on tourism, no response has been received, leaving questions about the government’s approach unanswered.
What country visits Mexico the most?
The United States
The United States takes the lead as the primary country of origin for international air passengers arriving at or passing through Mexican airports. In 2022, approximately 13.4 million air travelers journeyed from the United States to Mexico, solidifying its position as the top source of visitors to this Latin American destination.