October 16, 2017
With the MXN Peso breaking $19, we’ve reached a point that the “experts” did not predict until next year, 2018.
In another very big bet on a forward-look, the Mexican Government just made the biggest bet ever for 2018, as
“The World’s Largest Oil Hedge Is Complete”
locking in 330 million of barrels of 2018 Mexican oil at $46 a barrel, guaranteeing a stable level of $15 billion in US dollar** revenues for the Mexican Gob’s 2018 budget.
**Notice that since the hedge contracts were negotiated in US Dollars (just like in the past) … even if the Mexican Peso falls … the Mexican Gob. still collects it’s oil revenues in US dollars, which softens the blows when the MXN peso weakens vs the US Dollar.
Historical Context: the Mexican Gob. has made some really shrewd oil hedging contracts in the past, as they locked-in $76 a barrel oil when the price fell to $50 a barrel (saddling 7 big banks, NY + Deutsche Bank + Barclays with huge losses) … and then Mexico locked in the next round of hedging contracts at $48, as the price then fell down to $20 a bbl (again saddling big Wall Street banks with huge losses).
Which way will things go this time?
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Feel free to copy while giving proper attribution: YucaLandia/Surviving Yucatan.
Steven M. Fry
Read on, MacDuff!