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Monetary Devaluation

Like every other product the coin of a country has a price, which is the exchange type; this represents the quantity of Mexican pesos that are needed to buy an American dollar, and like every other price this one is determined because:

a) Because of the offer and demand of dollars, or

b) Because of the monetary authorities of the country.

The origin of the exchange types comes from the necessity that residents of one country have to buy another country's money in order to cover their international debts. In Mexico's case, residents demand dollars to buy goods and services from the exterior (imports); the offer of dollars comes from the selling of goods and services to the exterior (exports) as well as the income of capital such as foreign savings or direct investment. When imports and exports are not balanced the offer and demand of dollars is altered, which can also be affected in a short time for speculative reasons or simply as a precaution.

The changes in the economical situation of our country or in the ones with whom we realize mostly the exchange of goods and services, affect the behavior of demand and


But in six months our exported product has risen its price by $ 500.00 and the peso still has the same exchange type. As a consequence, our product will be more expensive to other countries they will not buy it.

We export products to the United States. Suppose we export a TV; our TV costs $ 2,000.00 and the peso has an exchange type of $ 7.90 for dollar.

While the devaluation in 1938 was associated with the petroleum expropriation, the one in 1948 was considered as part of the worlds adjust after the Second World War. Until July 1948, the exchange type was at $ 4.65 for dollar and from that date on the peso maintained itself floating until in July 1949 it fixed itself at a new price of $ 8.65 for dollar. This price was modified again in April 1954, where it settled at $ 12.50 for dollar without there ever being a point of previous fluctuation. Its adjustment was precipitated by the public expense realized to stop temporarily the economical activity due to the recession that the United States suffered after the Korean War, not leaving out the breakdown on the prices of raw materials that Mexico exported.



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Approximate Word count = 787
Approximate Pages = 3 (250 words per page double spaced)


  

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