Business, Legal & Accounting Glossary
The peso is the legal tender of Mexico. A peso is denoted by sign $ or Mex $ (in order to differentiate it from other dollar-denominated currencies) and its international exchange code (ISO 4217) is MXN. Before 1993 reevaluation of the Mexican peso was denoted by the code MXP.
Modern peso and all dollar currencies share a common origin- which traces back to the 15th–19th century. Spanish dollar, most continuing to use its sign, “$”.
At present, the Mexican peso is the 12th most traded currency in the foreign exchange market and the third most traded currency in the Americas, and undoubtedly the most traded currency in Latin America.
The peso is subdivided into 100 centavos, and denoted by symbol “¢”. The name peso is derived from earlier used coins called as pesos oro (gold weights) or pesos plata (silver weights). The exact English translation of the Spanish word peso is weight.
First Peso
The peso was formerly the name of the eight-real coins issued in Mexico by Spain. These coins also known as the Spanish dollar or pieces of eight were extensively used right through the Americas and Asia in the 19th century when the Spanish Empire was at its peak.
Following Mexico’s independence in 1821, the new administration continued using the same monetary system of 16 Silver Reales = 1 Gold Escudo. The peso bearing the value of 8 Reales was the largest silver coin. In the meantime, a paper-based currency was also issued, denominated in pes.
Coins denominated in centavos were issued for the time in 1863, and its worth was one-hundredth of the peso. Soon after in 1866, coins denominated “one peso” were introduced. However, coins denominated in Reales continued to be issued until 1897.
Then in 1905, the proportion of gold used in peso was reduced by 49.3% but the silver content of the peso remained initially unchanged (subsidiary coins were debased).
After 1918, both the weight and the metallic composition of all the silver coins changed (proportion of silver declined significantly); this trend continued until 1977 when the last silver 100-peso coins were minted.
Second Peso
During most part of the 20th century, the Mexican peso continued to be as one of the very few stable currencies in Latin America, as its economy did not go through the periods of hyperinflation common to other countries in the region. Nonetheless, following the Oil Crisis of the late 1970s, Mexico defaulted on its external debt in 1982, and as a consequence, the country had to experience substantial capital flight, amid inflation which stretched for many years and devaluation. At that moment, in order to save the flagging economy, government economic strategy called the “Stability and Economic Growth Pact” (Pacto de estabilidad y crecimiento económico, PECE) was implemented under President Carlos Salinas.
Later, (on January 1, 1993) the Bank of Mexico launched a new currency, the nuevo peso (in English it means ”new peso”, or MXN), denoted by symbol “N$” followed by the numerical amount. One new peso, or N$1.00, was equivalent of 1000 of the obsolete MXP pesos.
On January 1, 1996, the word “Nuevo” was dropped from the name and new coins and banknotes – similar in every aspect to the 1993 issue, were put into circulation. However, the ISO 4217 code remained unchanged as MXN.
As Mexico’s economy stabilized in the 1990s, followed by rapid growth in the economy and foreign investment the Mexican peso turned into a stable currency; and, at present, it is among the 15 most traded currency units. Since the later part of the 1990s, the peso has traded at about 9 to 15 pesos per U.S. dollar.
Peso outside Mexico
The Spanish dollar or Mexican peso was extensively circulated in the early United States. Following a declaration of July 6, 1785, the value of the United States dollar was fixed approximately to the Spanish dollar. Both of these currencies were equivalent based on the weight of silver in the coins. The first U.S. dollar coins were not issued until April 2, 1792, and the peso was treated as the officially recognized currency and it circulated widely along with other foreign coins, until February 21, 1857.
In Canada, also the Spanish dollar remained a legal tender, together with some other foreign silver coins, until 1854 and continued to circulate beyond this date. The Mexican peso also served as the basis for the introduction of new currencies such as Straits dollar, the Hong Kong dollar, the Japanese yen and the Chinese yuan.
The term Chinese yuan is based on round Spanish dollars, Mexican pesos and other 8 Reales silver coins- which were widely used in China during the 19th and 20th century. For a short time, the Mexican peso was also a legal tender in 19th century Siam, when government mints could not manage a sudden arrival of foreign traders and was exchanged at a rate of three pesos to one Thai baht, overcoming the shortage of coins.
19th Century
The first coins under the “peso” currency were called as 1 centavo pieces, minted in 1863. Emperor Maximilian, head of state of the Second Mexican Empire from 1864–1867, minted the first coins with marking the word “peso” on them. While emperor’s portrait was on the obverse, depicting the legend “Maximiliano Emperador;” the reverse showed the imperial arms and the legends “Imperio Mexicano” and “1 Peso” and the date. They were produced from 1866 to 1867.
The New Mexican republic continued to strike the 8 Reales piece, but simultaneously it also started minting coins that were denominated in centavos and pesos. As a result, in addition to Copper 1 centavo coins, silver (.903 fineness) coins of 5, 10, 25 and 50 centavos and 1 peso were introduced between 1867 and 1869. Then in 1870, gold 1, 2½, 5, 10 and 20-peso coins were introduced.
While the obverses of all these coins featured the Mexican ‘eagle’ and the legend “Republica Mexicana., the reverses of the larger coins depicted a pair of scales and those of the smaller coins, the denomination. One-peso coins were produced between 1865 and 1873, a period where the production of 8 Reales coins recommenced. In 1882, even though cupro-nickel 1, 2 and 5 centavos coins were issued, minting of these coins halted for two years. In 1898, 1 peso coins were reintroduced bearing a Phrygian cap, or liberty cap- a design being carried over from the 8 Reales.
20th Century
In 1905 a monetary reform was introduced in which the proportion of the gold content in the peso was reduced by 49.36% and the silver coins were (with the exception of the 1 peso) reduced to token issues. At that moment, bronze 1 and 2 centavos, nickel 5 centavos, silver 10, 20 and 50 centavos and gold 5 and 10 pesos were issued.
In 1910, a new peso coin was issued, called Caballito, this new issue was very famous as it was considered as one of the most beautiful of Mexican coins. T
The obverse carried the image of Mexican official coat of arms (an eagle holding a snake in its beak, and standing on a cactus plant) and the expressions “Estados Unidos Mexicanos” and “Un Peso.” The reverse depicted a woman riding a horse, her hand lifted high in exhortation, and the date. These coins were minted in .903 silver during the period of 1910 – 1914.
In the period between 1917 and 1919, the gold coinage issued new denominations which included 2, 2½ and 20-peso coins. However, the circulation of gold coins completely stopped in 1921. In 1918, the peso, just like most other foreign currencies was debased amid depleting gold reserves, bringing it into line with new silver 10, 20 and 50 centavos coins.
All of these coins were now minted in .800 silver for peso carrying a weight of 14.5 g. The liberty cap design, which was struck on other silver coins, now applied to the peso. Later in 1920, another debasement brought down the fineness to .720 with 12 g of silver to the peso. Between 1919 and 1920, bronze 10 and 20 centavos coins were introduced; however coins of having these denominations were also minted in silver until 1935 and 1943, respectively.
In 1947, silver coins having new images were struck. The new issue included 50 centavos and 1 peso having .500 silver finenesses and a new 5-peso coin in .900 fineness. An image of José María Morelos appeared on the 1 peso and this feature continued to exist until its demise. The silver composition of this series was 5.4 g to the peso. Then in 1950, this content was changed to 4 g. just then coins having .300 finenesses with denominations of 25 and 50-centavo and 1-peso coins were also minted alongside .720 fineness 5 pesos. A new picture of Morelos appeared on the 1 peso, with Cuauhtemoc on the 50 centavos and Miguel Hidalgo on the 5 pesos. No changes were made in the silver content except on the 5 pesos. In this period 5 peso, and to a small extent, 10 peso, coins were also used as vehicles for special commemorative striking.
Bronze 50 centavos were introduced in 1955, together with smaller 5-peso coins and a new 10-peso coin. In 1957, 1-peso coins were issued in .100 silver for the first time. This series included 1.6 g of silver per peso. A unique 1 peso was minted in 1957 to commemorate Benito Juárez and the constitution of 1857. These were the last editions in silver pesos. The 5-peso coin now weighed 18 grams made with 0.720 silver; the 10-peso coin weighed 28 grams and contained 0.900 silver.
Between 1960 and 1971, a new array of coins were introduced, which included brass 1 and 5 centavos, cupro-nickel 10, 25 and 50 centavos, 1, 5 and 10 pesos and silver 25 pesos (only issued 1972). In 1977, silver 100 pesos were launched. Then in 1980, smaller 5-peso coins were introduced together with 20 pesos and (from 1982) 50 pesos in cupro-nickel. In the period between 1978 and 1982, the sizes of the coins with denominations of 20 centavos and above were reduced; subsequently, between 1984 and 1988, base metal 100, 200, 500, 1000 and 5000-peso coins were introduced.
Nuevo Peso
The introduction of the nuevo peso (new peso) was due to hyperinflation in Mexico. In 1993, Presidente Carlos Salinas de Gortari removed three zeros from the peso, bringing a parity of $1 New Peso for $1000 of the old ones.
During this transition phase, people were allowed to trade in their old notes, but simultaneously old notes were also removed from the circulation. This change took a period of three years from January 1, 1993, to January 1, 1996. At that point, the word “nuevo” was no more printed in all newly produced coins; besides, “nuevo” notes were also stopped in circulation, and thus it marked the return of a system where the currency and the notes were denominated only in pesos.
Confusion was circumvented by making the “nuevo peso” currency almost alike to the old “peso”. Both of these versions circulated at the same time, while all currency that only said “peso” was completely taken off from circulation. The Banco de México (Bank of Mexico) later issued new currency showing new graphics, also under “nuevo peso”. This new addition was shortly followed by the current, more or less identical, “peso” currency without the word “nuevo”.
In 1993, coins of the new currency (dated 1992) were issued. The new series included the denominations of 5, 10, 20 and 50 Centavos, 1, 2, 5, 10, 20 and 50 Nuevos Pesos. Whereas 5 and 10 Centavos were minted in stainless steel, 20 and 50 Centavos were minted in aluminium bronze.
The nuevo peso denominations had a bimetallic composition. Denominations of 1, 2 and 5 Nuevos Pesos were made from aluminium bronze centres and stainless steel rings, and the 10, 20 and 50 Nuevos Pesos were produced from .925 silver centres and aluminium bronze rings. In 1996, the word nuevo(s) was not included in the coins. New 10 Pesos were introduced with base metal substituting for the silver centre. At present, 20, 50, and 100-peso coins are the only circulating coinage in the world to contain any silver.
In 2003 the Bank of Mexico started the launch of a new series of bimetallic $100 coins in a phased manner. While the obverse of these coins depicts the traditional Coat of arms of Mexico, their reverse bears the individual coats of arms of the component states. The first states to be honoured in this manner were Zacatecas, Yucatan, Veracruz, and Tlaxcala. These coins are extremely rare in circulation; nevertheless, their uniqueness offsets the awkwardness most users feel at having such a big amount of money in a single coin. Even though the Bank has tried to encourage users to collect complete sets of these coins, issuing special display folders for the purpose, the high cost associated with the making of these coins has worked against them. Gold versions of these coins have also been issued, with the outer ring made of gold, in place of aluminium bronze.
The coins that are frequently found in circulation have face values of 50¢, $1, $2, $5, and $10. The $50, 10¢ and 5¢ coins are hardly found under circulation and largely disliked by users. The $20 coin is not as commonly used as the $20 banknote. By 2006 and early 2007, the usage of 20¢ coins also started to decline gradually.
Although small commodities are priced in multiples of 10¢, many retailers may prefer to round the total prices to 50¢. It is not uncommon in Mexico to find customers in supermarkets being asked to donate those cents to charities so that they can round the amount to 50¢ or 1 peso.
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This glossary post was last updated: 14th April, 2020 | 0 Views.