Mexican Contracts: Hedging Against Currency & Inflation
Mexico offers deep trade and investment linkages with global partners and a diversified domestic market. That makes long-term contracts — infrastructure concessions, multi-year supply agreements, project finance loans, and energy offtake deals — commercially attractive. At the same time, such contracts are exposed to two related macro risks:Currency risk: shifts in the Mexican peso (MXN) relative to major billing currencies, most often the US dollar, can alter the actual worth of both payments and returns.Inflation risk: sustained increases in overall price levels gradually diminish fixed-rate income streams while pushing up local expenses tied to labor, materials, utilities, and taxes.The Bank…
