Superman may be the GOAT in the DC universe (sorry, Batman), but in the world of currencies, the “Super Peso” has taken flight as investors’ favorite. The Mexican Peso claimed the title of 2023’s best-performing currency, soaring to its highest real effective exchange rate since 2005. Its stellar performance has even made skeptical investors think twice about it.

Peso’s secret sauce: In recent years, factors like record remittances, nearshoring, and increased investments in Mexico have propelled the country’s currency against the US dollar. In 2023, the Peso notched its largest annual gain of 15% against the dollar — and since the end of 2016, it’s climbed 25%.

• Record-high 11.25% interest rates fueled a 40% surge in foreign direct investments in 2023 — making Mexico one of the top manufacturing destinations for global companies.
• With the US embracing “friend-shoring” with Mexico to reduce economic reliance on geopolitical rivals like China, Mexico has cemented itself in a favorable global trade position.

Put your Pesos where your mouth is

Between 2022 and 2023, the value of goods imported from Mexico to the US grew ~5% to over $475B — while US imports from China dropped 20% (BI). That helped Mexico surpass China as the leading US importer for the first time in two decades. But Mexico’s container imports from China jumped 35% last year — rising to a 60% increase in January, which Xeneta’s chief analyst says is due to tactics to avoid US tariffs (BBG).

• That’s accelerated investments in Mexico from Chinese electric vehicle (EV) companies looking to sidestep the hefty 27.5% tariffs on Chinese EVs imported to the US.
• BYD, which briefly overtook Tesla ($TSLA) as the world’s largest EV competitor, is one of at least a dozen Chinese EV companies that have invested or expanded their investments in Mexico in recent years.

Mexico gets in on AI: In response to US-China export bans affecting the AI supply chain, major American AI companies are urging their Taiwanese suppliers to shift manufacturing to Mexico. Foxconn, a leading AI server manufacturer, has poured ~$690M into Mexico since 2020 — and the growing presence of Taiwanese firms could “dramatically modify the industrial structure of Mexico in the next 10 years,” according to Francisco Cervantes, head of Mexico’s largest private-sector organization (WSJ).