What is the Currency of Mexico?

By Joyce Chepkemoi on August 13 2019 in Economics

The Mexican peso is the official currency of Mexico.

The Mexican peso is the official currency of Mexico. Peso is a Spanish word which means “weight”. It is the 3rd most used currency coming from the Americas and the 8th in the world. In Latin America, it is the most used currency. Before the peso was introduced, the Mexicans traded using reales coins until 1897. The introduction of peso saw the reales gradually replaced with 1 peso exchanging for 8 reales.

First Peso

The pesos were eight pieces of the earlier reales which was used in both America and Asia for trade at the height of the Spanish Empire until early 19th century. In 1863, coins were introduced in centavo denominations which were worth one hundredth of a peso, followed in 1866 by one-peso denominated coins. Since the peso was made of a measure of gold and silver, 1905 saw the reduction of the gold by 49.3% though the silver component remained unchanged. The weight of all silver coins declined since 1918 until 1977 when the last silver coin was minted. Bank notes were first used in 1823 in small denominations of 1, 2, and 10 pesos.

New Peso

In the 20th century, the Mexican peso was the most stable currency in Latin America. This was because the country’s economy was not affected by hyperinflation like most of the surrounding countries. However, 1982 saw the country suffer the worst case of capital flight after the country defaulted its external debt after the oil crises of the late 1970s. The country lost in terms of value and assets until the government adopted a strategy called the “Stability and Economic Growth Pact” under the leadership of President Carlos Salinas. The president basically stripped the three zeros from the former peso to make it a $1 New Peso for $1000.

Bank Notes

1920 saw the introduction of 1-peso notes by Monetary Commission, but the Bank of Mexico issued the 2-peso notes. Over the years, the production of smaller peso notes ceased and the introduction of 5,000-pesos notes came in 1988. It was then increased to larger values in the same year to 100,000-peso notes. On January 1, 1993, a new currency was introduced by the Bank of Mexico. The “new peso” (Nuevo peso) was equal to 1000 obsolete MXP pesos. MXP was the new peso abbreviated as “N$” followed by the amount in numerals. The modifier was then to drop the word Nuevo on the new coins and banknotes in January 1, 1996. The peso has gradually increased from mere coins to larger denominations of bank notes since 2003. The smaller denominational coins are rarely circulated, and are being replaced gradually by light weight bank notes of higher value.

Current Performance

Despite the shake-ups of the late 1970's when the country’s economy almost crumbled, in recent years the peso has been ranked as the 15th most traded currency units. The economy of Mexico is now stable and there is growth in foreign investments. The peso however is not accepted as a currency outside Mexico apart from the US, Guatemala, and Belize.

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