Mexico Plant Peso Exposure Calculator
A Mexican plant earns revenue in dollars and pays most of its local costs in pesos. When the peso strengthens, the same peso payroll costs more dollars and the nearshoring savings case shrinks. This calculator shows the size of that effect for your own numbers.
Your numbers
Wages, rent, utilities and local services paid in pesos.
How much stronger the peso gets versus the budget rate.
For example peso sales to local customers.
Your results
A simple sensitivity model. It ignores hedge cost, timing of payments, forward points and USD-linked contracts. It is not treasury or investment advice.
Monthly unhedged increase vs peso strengthening
Sweeps Peso strengthening scenario from 0 to 30, holding your other inputs fixed.
Report peso and dollar costs from one ERP view
Optional: a short review of how multi-currency plant costs could be reported from your ERP.
Optional. The tool and every export work without this. No spam.
How to use it
Enter the monthly peso cost base, the exchange rate your budget uses, and a strengthening scenario such as 10 percent. Set the hedged share if the treasury has forward contracts, and the natural offset if you sell some product locally for pesos. The result shows the monthly and annual USD increase you carry unhedged. Move the slider to see the whole curve in the chart.
- Use pesos paid in cash, including payroll and rent
- Set the budget rate to the one used in the standard cost
- Test several scenarios, not only the most likely one
- Revisit the hedge ratio each quarter
The formula
The scenario exchange rate is the budget rate times one minus the strengthening percentage, because fewer pesos are needed per dollar. The USD cost is the peso cost divided by the exchange rate, so the increase is the scenario cost minus the budget cost. The net increase then multiplies by the unhedged share and the share not offset by peso revenue.
Reading the result
Compare the annual unhedged increase with the annual saving your nearshoring case expected. If a plausible peso move wipes out a large part of the saving, the plan needs hedging, local sourcing of inputs priced in pesos or pricing clauses. Note that the cost increase is not symmetric in percent terms, because a 10 percent stronger peso raises the USD cost by about 11 percent.
Common mistakes
Applying the move to the USD rate instead of the peso, mixing costs paid in dollars with pesos in the base, and treating a hedge as free. Hedges cost money and lock rates for a limited period. Also remember that labor contracts and some leases are indexed, which can offset or amplify exchange moves.
Frequently Asked Questions
Why does a 10 percent stronger peso raise cost by more than 10 percent?
Cost in USD is peso cost divided by the rate. If the rate falls by 10 percent, you divide by 0.9, which raises the USD cost by about 11.1 percent. The effect grows faster at larger moves.
What belongs in the peso cost base?
Include all costs actually paid in pesos: wages and benefits, rent, utilities, local services, taxes and local materials. Exclude imported materials priced in dollars, since they do not change with the exchange rate.
How should I choose a hedge ratio?
That is a treasury decision that depends on your forecast certainty, cost of hedging and risk appetite. Many firms hedge a declining share over a rolling period. Ask your bank or treasury advisor for options.
Does the calculator include inflation in Mexico?
No. Peso inflation raises costs over time and can offset or compound exchange moves. Model it separately by increasing the peso cost base each year.
Netray can help bring plant cost actuals in pesos and dollars from your ERP into one report so exposure is tracked on real data.
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