Mexico Refuses to Accept US Greenbacks
In an effort to stem the tide of drug money being laundered through the country, Mexico put severe restrictions on deposits of U.S. dollars by individuals and businesses in any given month.
The restrictions have a second chilling effect: The American greenback is no longer the standard of trade in Mexico.
On September 13th, Mexico restricted sales in US dollars above $100. Retailers must apply for a license to manage deposits. Companies doing business in border states and in tourist areas can exchange as much as $7,000 total in US currency for Mexican pesos.
Mexican citizens can deposit no more than $4,000 in U.S. dollars each month. Tourists can deposit as much as $1,500 into Mexican bank accounts monthly.
The restrictions that took effect two months ago limit cash dollar deposits by Mexican individuals to $4,000 per month. Foreign tourists can change as much as $1,500 monthly to Mexican bank accounts.
Other measures make it illegal to buy property, vehicles, airplanes and jewelry costing more than $100,000 pesos, which is about $8,109 in U.S. dollars. Those who get caught breaking the law face 5 to 15 years in prison.
Mexican President Felipe Calderón proposed additional measures in August that make it illegal to buy property with cash and would ban gambling or the purchases of vehicles, airplanes and jewelry with more than 100,000 pesos ($8,179) in cash. Penalties would range from five to 15 years in prison.
Tourists are frustrated by the new law. Many of the bridge locations into Mexico no longer accept US dollars. The measure is due to a conflict between Mexico’s federal roads and bridges authority (CAPUFE) and the bank that takes its deposits in dollars.
The Mexican authorities are optimistic the measures to reduce money laundering will make it less profitable for drug gangs to do business in Mexico. President Calderón is equally concerned about arms smuggling into his country. Unlike the U.S., which gives citizens rights to possess firearms, possession of firearms in Mexico is a serious offense. That has left poor people defenseless against drug gangs who have the funds to buy weapons and pay bribes when necessary.
The Mexican peso increased 7.1% over the U.S. dollar this year. The measures have reduced deposits of US dollars 75% in September.
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