On September 13, 2017, Mexico’s Chamber of Deputies met to discuss a potentially world-changing event regarding precious metals—specifically silver.
Mexico has had a history of using silver coins as currency before converting to the peso, which has been steadily losing its value against the US Dollar over the past forty years. This has put Mexico in a financially difficult place. It’s citizens have been unable to build up their savings as the peso continues to suffer.
In the September 13th forum, entitled, “The Promotion of Savings by Mexicans,” the Chamber of Deputies, led by Congressman Francisco Javier Pinto, discussed how the situation might be remedied. As the peso decreases in value, how can Mexican citizens—and their savings—be protected?
The answer, if it succeeds, could change the world of silver investing.
Saving money is vital to the growth of Mexico’s economy and the financial security of average citizens. However, a poll conducted in 2015 found that only 15% of Mexicans save money by depositing funds into savings or other bank accounts, buying stocks and bonds, or making contributions to an official retirement account. Meanwhile, 32% save their money by “stuffing [it] under the mattress.”
With the fluctuation of the peso over the past forty years, this method of saving has left Mexicans with little to guard against surrendering even more of their purchasing power, rather than retaining and increasing it.
The solution discussed by the Chamber of Deputies was to instate a law that would monetize Mexico’s Silver Libertad once more, allowing Mexicans to save and trade in their original currency.
By monetizing the Silver Libertad and encouraging Mexican citizens to purchase it, they could begin building formal savings for themselves, while safeguarding those savings against inflation and the continual devaluation of the peso.
Instead of fixing a permanent value in pesos on the Libertad, the bank would continue adjusting the value of the coins based on the price of silver in order to protect Mexicans from the peso’s decline.
How might this affect you?
Mexico is the largest producer of silver bullion globally, mining 186 million ounces of silver in 2016 alone. Much of this silver is then exported to other nations for minting and silver coin production. However, if the proposal percolating inside the Mexican congress were to gain political traction, it could cause a dramatic shift in the silver market, impacting silver prices and availability around the world.
If Mexico kept more of its silver in the country for production of the Libertad rather than exporting it, assuming the Mexican people responded favorably, buying the coins, the price of silver per ounce would rise globally.
Higher silver prices mean greater savings and wealth for current holders of silver—not just Mexicans who purchase Libertads, although we wish them well in their efforts to re-monetize silver!