On December 16, officials from the Bank of Mexico and the Mexican Ministry of Finance held urgent consultations to discuss the possibility of a depreciation of the Mexican peso.

Experts from the Bank of Mexico believe that a 10% devaluation is a feasible option, while officials and think tanks from the Ministry of Finance insist on a 7% devaluation, which is within an acceptable range, as gains from capital investment in US dollars can offset losses due to the devaluation.

The two sides disagreed over the extent of the devaluation, and the meeting lasted all morning, with experts on both sides arguing with each other, presenting various statistics to refute each other's plans, and by noon there was still no clear conclusion.

"After discussing it for so long, we still haven't reached a consensus. Antonio, don't you see? Seeing that it was already noon, Otis had no choice but to stand up and play the round.

Although the experts and scholars of the two sides were-for-tat, spitting and spitting everywhere, the chief generals of the two sides, Governor Otis and Minister Antonio, did not speak out, and the role of these monetary experts and economists was reflected at this juncture.

It was already noon, and Otis could only stop the debate and fill his stomach first. Since he is not an official of the Ministry of Finance, he does not know the arrangements of Antonio's itinerary, so he can only ask Antonio's opinion first.

No one could have imagined that Antonio would not give Otis any face, so he immediately got up and said: "Since there is no result from the discussion, these consultants will naturally continue to discuss." I have another meeting in the afternoon. I won't accompany you for now! After saying that, he walked out of the conference room on his own.

Several officials from the Ministry of Finance who were next to him hurriedly followed the minister and left the conference room in full view.

Otis snorted and didn't say anything to keep Antonio. A morning's discussion had already made him very dissatisfied in his heart, and I believe that the Minister Antonio of the same rank as him was the same. However, for the sake of the overall situation, he still forced himself to suppress his anger.

It is important to know that the Bank of Mexico is the central bank of Mexico and has the power to operate independently granted by the Congress, which means that Mexico's monetary policy is in the hands of the Bank of Mexico. At least from a legal point of view. But in the specifics. In formulating monetary policy, they still have to consult with the Ministry of Finance, which is in charge of fiscal policy, and strive to perfectly coordinate the two to jointly achieve the goal of promoting balanced economic growth.

In addition, neither side can make decisions without the president. But the presidency is getting better. As long as there is sufficient argumentation. Able to convince the economic staff around the president. Normally, resolutions from both sides will not be vetoed.

Now the Ministry of Finance, for its own benefit, is ignoring the peso, which is already under a lot of pressure, which makes Otis extremely annoyed. Although the differences between the two sides are not big. Literally just a 3 percentage point difference. But it is these 3 percentage points, put into the entire monetary operation system, which means a difference of billions or tens of billions of dollars, so the talents of the Bank of Mexico and the Ministry of Finance are clinging to the bottom line.

Just when the scene fell into extreme embarrassment, the door of the conference room was pushed open from the outside, which attracted the attention of all the officials and scholars in the conference room, and I saw a middle-aged man about thirty years old entered, his face was anxious, and as soon as he entered the door, he said loudly: "Mr. President, something is wrong......

The voice stopped abruptly.

Okova is the secretary in charge of the president's daily communications, and the official in charge of monitoring any abnormal fluctuations in the foreign exchange market and capital market will notify him as soon as possible, and then he will notify President Otis. As soon as he received the news of the foreign exchange market, he rushed to the conference room as soon as possible, and even forgot the basic etiquette of knocking on the door. When he opened his mouth to say, "It's not good", he found that everyone in the conference room was looking at him, which surprised him and subconsciously stopped what he was about to say.

"What? Could it be that the sky is falling? Seeing that his cronies were making a fool of himself, Otis was even more annoyed, his face sank, and he reprimanded in a stiff tone.

Okova, who had been with Otis for a long time, still didn't understand that the Elder was already dissatisfied with him. But at this time, he didn't care about anything else, walked up to Otis in three steps and two steps, covered his mouth with his hand, and whispered in Otis's ear what had just happened in the foreign exchange market.

Seeing Okva's appearance, everyone in the room focused their eyes on Otis's face, hoping to see something from his face. But to their disappointment, from Okva's report to the end, Otis's face did not change in the whole process.

"You, you, and you, come out with me!" After Okova finished his report, Otis looked at several of the main advisers of the Bank of Mexico and motioned for them to go out, then stood up and said to the others: "Something happened suddenly, I need to go out and deal with it, I hope you will forgive me." Someone will take you to rest at noon, and in the afternoon we will continue our discussion in the morning. With that, he walked out of the conference room without looking back.

Seeing his appearance, everyone realized that something big was wrong, but their level was not enough, and they couldn't find out what the news was for a while. In this way, all the experts present at the meeting had a strong curiosity, and even the exquisite lunch was tasteless.

Among them, there are also many smart people, and from the identities of several experts named by Otis, they vaguely guessed that what happened was the foreign exchange market, because except for one of these experts who is an interest rate expert, the others are all famous scholars in foreign exchange.

……

"$2 billion in one morning!" In a smaller conference room, as soon as the door to the conference room closed, Otis spoke to a few experts who were still confused.

"So much?" An older-looking scholar said with a frown. His name is Javier. Bardon is a professor at the National Autonomous University of Mexico and one of the most important staff members of the Bank of Mexico. "Can we consider borrowing from the United States, dealing with this for a while, and then thinking about depreciation?"

For the depreciation of the peso, even within the staff of the Bank of Mexico. There are also different opinions, and Javier is one of them, but this difference in views has not been announced to the public, and it cannot be made public.

"Can't!" Otis shook his head and categorically rejected Javier's proposal. He didn't know anything else, but he knew very well about the new president, and although he was still always pro-American on the surface, Otis was already clearly aware that the new president and his cabinet had gradually sought policy independence. to get rid of American influence.

"But at the current pace of dollar outflows. Even a 10% depreciation does not guarantee anything, and may lead to a massive outflow of dollars. Although the proposal was rejected, Javier was not discouraged and still analyzed it somewhat self-consciously.

"Now the dollar has flowed out on a large scale!" Otis said angrily. "And there are signs. This time it could be that hedge funds in the United States are maliciously shorting the peso. Just like they short the pound, the franc. ”

At the mention of the pound and the franc, everyone is silent, they are experts in the study of currencies. Naturally, hedge funds are aware of the role they play in this. The central bank of any country that can freely convert its currency is surprised by the enormous energy shown by hedge funds.

Now that hearing that something similar is about to happen in Mexico, everyone present is a little overwhelmed, considering that the Quantum Fund alone has tens of billions of dollars, which is enough to hit Mexico's now fragile foreign exchange reserves.

The most important thing now is no longer the discussion with the Treasury about the 3 percentage point, but the question of how to preserve the value of the peso in the face of future hedge fund attacks.

"Liberalize the exchange rate system and let the peso float freely?" Javier thought about it for a long time and proposed a plan that seemed feasible, but as soon as his words came out, they were immediately rejected.

"It's impossible!" Otis categorically vetoed, "If the foreign exchange system is liberalized rashly, it will inevitably lead to a large amount of dollar capital flight, and then not only the exchange rate market, but also the stock market and the bond market will collapse together, because now most of the dollar capital is invested in these two markets, and then it will not be as simple as a simple currency crisis, but will evolve into a crisis of the entire financial system, and even the country's real economy will be buried with it." ”

Liberalizing the exchange rate system can only be Zuihou's choice, and before that, the Bank of Mexico must do something, otherwise it will be blamed infinitely by the entire market and the country, and even all the charges will be planted on them. Moreover, the president's side will not agree. Therefore, Otis did not even think about it and rejected Javier's proposal.

"Maybe we can learn from France, depreciate by 15% first, and see how the market reacts." At this time, Enrique, director of the Department of Economics and Management at the University of Guadalajara, another important aide to Otis, said, "There is a constant shock to foreign exchange reserves, but there should still be a lot of dollar funds." In this case, we cannot do nothing, and I believe that the fund that shorted Mexico should have spent a lot of money during this time, as long as we can convince the Ministry of Finance to allocate some more dollar capital, maybe we will be able to withstand this attack. ”

This naturally went to Otis's heart, because in this way, the accusation of poor resistance was planted on Antonio's head, although he was not responsible for foreign exchange at all. Otis didn't hesitate for even a second, then nodded in agreement with Javier's proposal.

……

At night, the building of the Ministry of Finance was brightly lit, and even though tomorrow was the weekend, Antonio summoned a group of advisors who had been talking with the Bank of Mexico during the day.

Physically and mentally exhausted, Antonio lay on the couch, half-closed eyes as he listened to the members of the advisory group report on their work, and one term after another came out of their mouths. Antonio listened for a long time, but still did not understand what these experts were going to say, Zuihou sat up straight and asked word by word: "What are your opinions and conclusions?" ”

Several experts involved in the discussion immediately panicked, and after looking at each other for a while, an older expert said: "The conclusion of our discussions with the bank is that we have agreed to a 15% depreciation of the peso." ”

“15%？”

Antonio felt dizzy and couldn't believe what he was hearing. Before he left, the bottom line he gave was 7%, how could it become 15% after an afternoon? You know, even the Bank of Mexico initially gave a range of only 10%! (To be continued......)