Riding Out the US Recession in Mexico: The Exchange Rate

The exchange rate, i.e. the cost of converting one country’s currency to another country’s is a big deal if you’re planning a future Mexican vacation, or more optimistically new life in Mexico, in American dollars. 

Much of the everyday chaos, anxiety and shortages that have already begun in the US I’m hoping to avoid.  But in watching the American economy meltdown with morbid fascination from a distance, I wondered how it could impact my life in Mexico, Particularly should the exchange rate go seriously south.

Taking a look at the history of the Mexican peso to dollar exchange rate, it was interesting - at least interesting if you’re digging in your heels on a specific Pacific beach in Mexico (They won’t take me alive!).

Before I conduct any research, I always start with what I’ve always called my “Palapa Survey;” checking in with my expat community to see if I’m missing something obvious. When I asked them if they felt any alarm about a US Recession causing a steep decline in the dollar, as happened in two of the three last recessions, they were notably blithe.

Likely they’ve only been coming to Mexico for the last 10 years or less. (Or maybe it was the margaritas. You really have to carefully time these types of surveys).  For much of the last 10 years,  the exchange rate has hovered from a comfortable 17 pesos to the current outstanding 20+ pesos to the dollar. 

The exchange rate, during the Dot Com Recession (March 2001- November 2001) was 9.2 to 9.7 pesos to the dollar. Once I showed them on a calculator what difference there was between a 10 peso exchange and 20, eyebrows raised.

If you do a quick Google inquiry, Google will tell you in error that the highest Mexican Peso exchange rate ever was in February, 2025 at 21.5 pesos to the dollar. Wrong. It got as high as 23 as recently as the Pandemic and was 24 pesos to the dollar during the period of 2020. (The lesson here is not to trust A.I. if the answer is important.)

Many forces affect the exchange rate, and not just what the US does. The Mexican Peso Crisis of 1994 for example, when the exchange rate dropped 5.8 pesos to the dollar, was caused by Mexico not by US policy.

Recessions don’t guarantee a weakened dollar. During the Great Recession (December 2007- June 2009),  the rate hovered between 10.9 - 13.2 pesos to the dollar, really low.  But during the Pandemic Recession (February 2020 - April 2020) the dollars stayed strong 18.6 - 23.9 pesos to the dollar. 

For an example of what kind of impact rates have on a vacation or daily life in Mexico, if you pay 20,000 pesos a month for rent, at 20 pesos to the dollar, you see $1,000 dollars come out of your bank account from your withdrawal your rent. 

The same 20,000 pesos rent at a 15 peso exchange rate is $1,333 dollars out of your account. If you lived in the U.S and your landlord suddenly told you your rent would be $300 a month more, you’d likely squawk. At 9 pesos a dollar your rent would be $2,222 in US dollars! Not exactly what you move to Mexico for, is it?

If you plan on owning a home in Mexico, changes in the rate can have an enormous impact on the value of the home that could convert to gains or losses back in your home currency should you need to return home, another reason to budget and plan for a conservative, not overly optimistic rate when budgeting for a rent or home purchase.

As a vacationer, at 20 pesos to the dollar, a fine dining experience in most of Mexico (except in Mexico City where dining costs have skyrocketed), might cost 800 pesos ($40 dollars).  At a 13 peso exchange rate the same meal would be $61 dollars on your credit card. Tours, hotels, dining and excursions would all go up accordingly. 

My last grocery bill, for about two weeks of groceries (I eat well and have come to enjoy my $3 filet mignons) was $2,700 pesos, and a $135 dollar charge showed up on my credit card. At 15 pesos, it would show as a $180 dollars charge. These costs quickly add up.

But don’t let these concerns scare you out of escaping the upcoming US recession for a while or skipping the whole unpleasant experience altogether by coming to Mexico. When I moved to Mexico, the exchange rate was 13 pesos to the dollar and I still saved a lot of money living here. There are steps to take and one of them needs to be taken while the dollar is strong.

If you’re planning on a vacation next year or a long term stay, consider converting the money you’ll need to pesos now while the rate is 20+. Over 20 pesos to the dollar is a great rate. Sure, it’s possible the dollar could go higher, but history shows it rarely hits 22. Don’t be greedy. 

If at all possible, put the amount of money you’ll need for your time in Mexico, whether it be weeks or months, into pesos and lock in the rate while it’s over 20. WISE is a UK-based company that offers global money transfers, accounts, and platforms and gives very good exchange rates. 

If you can’t put it away proactively, check how it’s trending over time. Check daily and keep a record. Fortunately, the exchange doesn’t rise or fall abruptly. It fluctuates gradually, it trends, giving you a fair amount of time to react and plan. 

Where you exchange money makes a big difference. As a vacationer, never go to exchange centers in Mexico. They offer the worst rate. Mexican banks aren’t much better. Check to see if your US bank has reciprocal agreements with a Mexican bank, as they may wave the transaction fee. It might be better to exchange the money while still in the US. 

When withdrawing money from bank ATMs in Mexico, decline the conversion rate! The withdrawal process continues if you hit “decline.” (For months after I arrived in Mexico, I thought the system would kick me off if I declined the conversion.)  Exchange rates and fees are different from ATM to ATM. Avoid ATMs at convenience stores and unfamiliar businesses as they have a higher likelihood of less favorable exchanges and tampering.

Is your credit card a travel credit card? Travel credit cards often offer better rates as well as other travel perks. Find one that doesn’t change foreign transaction fees. Shop around. 

Folks, the coming years are likely to be difficult at home. I hope to see you in Mexico.

About the author:

Kerry Baker is the author of several books for the part-time expat and those considering retiring to Mexico.

If Only I Had a Place is your guidebook for renting in Mexico., The Mexico Solution: Saving your money, sanity, and quality of live through part-time life in Mexico is both a how-to and cultural guide on what to expect in Mexico. This is the only book on part-time life in Mexico that won’t leave you numb and anxious.

Most recently she released a cookbook The Lazy Expat: Healthy Recipes That Translate in Mexico. In Mexico, to maintain a healthy diet you must cook, not easy in a foreign culture. Don’t leave without it.