Tijuana has been hit hard by the recent collapse in the peso and is now a hotbed of investor speculation.
But the city is also struggling with an unprecedented government takeover of state power, with President Juan Manuel Santos promising to overhaul the economy and the political system that has driven Mexico’s economy into a tailspin.
With the pesos weakening and many people still living in poverty, it’s a hard sell for most Mexicans to invest.
The peso has fallen from a high of 86 to 70 to about 50 since mid-December, a fall of about 50 percent.
The government has said it wants to bring inflation under control and has pledged to privatize state-owned assets and sell off state-run businesses.
The government has set aside $3.5 billion to buy back stock in state-controlled companies, including cement makers, cement producers, and petroleum-equipment makers.
It has also begun to sell off the government’s stake in the Mexico City Stock Exchange.
That would allow investors to get exposure to the economy, and the move has been seen by some as a way to inject money into the economy while allowing Santos to consolidate his power.
But some economists worry that the government could use the stock buyback as an excuse to privatise companies that are vulnerable to a government takeover.
“The market is not willing to invest in companies that have been under government control for so long,” said Luis Barrera, an economist at UniCredit.
“So the government can buy off shares of companies, which is very dangerous.”
The government is also trying to sell the government-owned energy company, Pemex, which has a $1.6 billion debt, as part of the purchase.
It has said the move is needed to boost its financial stability and has promised to buy up the company.
Pemex has also been sold off by the government, with the government taking control of most of the shares in the company and selling them for $5.5 million.
The shares have since been bought by an investment group, the Cedeño group, which includes two Mexican investors, Jose A. Garcia and Eduardo F. Perez.
Despite the government buying up companies and selling off state assets, some analysts are skeptical that the market is ready for a sale of the state.
“This is a massive gamble,” said Francisco Vazquez, an analyst at RBC Capital Markets.
“The market isn’t ready for this.”
Perez is the chairman of the Cendeño group and a close ally of Santos, who has been at odds with business leaders in recent months over his plans to overhaul Mexico’s political system.
Perez and others in the group have been pressing Santos to sell Pemec to a private company, to be managed by the state and with a new leader, to make it more flexible.
If Pemes sell, Perez said, the government will lose money on the sale.
“That means that Pemeco would be forced to cut prices or else face the loss of income,” Perez said.
“So if you sell the Pemestas shares, you lose the business for a year,” he said.
Santos said he would not sell Pemses shares if they sell for more than $4 a share.
The market will probably respond in kind, he said, so the government has to take the risk.
The pesos also dropped against the dollar in recent days, but the fall was smaller than in December.
A government official said the pesote has fallen to a level below 80.4 against the U.S. dollar.
That compares with a 52-week high of around 85.5.
Many economists have forecast that the pesa will fall back to around 85 against the greenback, but many analysts are expecting a rebound.
In Mexico, the pesotas devaluation has been felt on Wall Street and by U.N. members.
Many of the world’s biggest bond markets have cut their exposure to pesos and are buying other currencies, including the euro, the yen, and a handful of other currencies.
Some economists think that, while the market will react to a peso decline, it won’t be enough to cause a real economic downturn.
The drop in the dollar and the government buyback, they say, will make it less attractive to people to put money in the economy.
“In the short term, the economy will rebound,” said Carlos Cabaño, an economic analyst at the Mercado Nacional de Energía y Economía, a think tank.
“But the economy won’t recover in the medium-term.
In the long term, it will take a lot of economic pain.”
The peson has also fallen against the euro.
In Mexico, it has dropped against 55-year notes from about 8.1 to 4.8 percent.
Mexico’s currency, the