Newspaper article The Christian Science Monitor

Mexico Plans to Slim Down Bloated Peso but Public Concerns about Devalued Savings May Hamper Transition. LOPPING OFF THE ZEROS

Newspaper article The Christian Science Monitor

Mexico Plans to Slim Down Bloated Peso but Public Concerns about Devalued Savings May Hamper Transition. LOPPING OFF THE ZEROS

Article excerpt

YEARS of inflation and devaluation have wreaked havoc on Mexico's peso, and today almost everyone is a "millionaire." From company presidents to office boys, most salaries are six or seven figures.

Prices are no different.

A McDonald's Big Mac costs 10,000 pesos; a Coca-Cola purchased in a store costs 500 pesos. Each United States dollar fetches a little more than 3,000 pesos - and that rate changes daily.

President Carlos Salinas de Gortari's government has decided the peso is too fat. Beginning Jan. 1, the central bank will cut three zeros from the peso.

A 50,000 peso note will become 50 pesos. People earning 1 million pesos a month will soon be bringing home 1,000 pesos a month. A US dollar will trade for 3 pesos.

Nobel prize-winning economist Milton Freidman has called the change "simple arithmetic."

Mexican political analyst Roberto Salinas Leon describes it as "monetary plastic surgery" for an overworked peso.

"Monetary transactions have become increasingly more difficult," he says, noting the government's recent introduction of a 100,000 peso bill to keep up with the structure of salaries and prices.

As Mexico attempts to become more of an international economic player, the image of its bloated currency has to change.

Businessmen agree with the government's upcoming plans.

"I think this is going to help tourism because people won't have to juggle all these zeros," says Nick Noyes, owner of a well-known Mexico City restaurant called Delmonicos.

Another US businessman working in Mexico says his company will be able to use many of the popular US-marketed computer programs for accounting. With so many items costing millions - or even billions - of pesos, computer operations have become cumbersome.

MANY Mexicans, however, are more cautious about the change.

"We get a tremendous number of calls every day asking us, what is this going to mean to savings?" says Sergio Sarmiento, a political analyst and the co-host of a popular daily radio show. …

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