Nov. 11 (Bloomberg) -- Mexico’s peso fell for a second week after the government said Interior Minister Jose Francisco Blake Mora, a top official in the country’s drug war, was killed in a helicopter crash.
The peso erased earlier gains today and closed little changed at 13.5395 per U.S. dollar after the government said Mora died along with eight people in the helicopter crash south of Mexico City. The currency, which was the worst performer among emerging-market currencies today, lost 0.4 percent this week. Benchmark peso bonds fell while the IPC Index of Mexican stocks briefly trimmed its increase before resuming the advance.
Mora, who took office in July 2010, was en route from Mexico City toward Cuernavaca for a meeting with judicial officials. While the government continues to investigate the cause, foggy conditions may have led to the crash, President Felipe Calderon said in a televised speech. Calderon is locked in a battle with drug trafficking organizations, which has led to the deaths of around 43,000 people since he took office in December 2006.
"If they confirm that it was some sort of assassination, then the risk perception would change in the short run," said Jorge Lagunas, who manages about $200 million at Mexico City- based Grupo Financiero Interacciones SA. "Until then I think absolutely nothing is changing. What is a reality is that the market took it pretty flatly."
Aviation Accident
Mora, 45, is the second interior minister in Calderon’s administration to die in an aviation accident. Juan Camilo Mourino died along with other security officials in their Learjet plane which crashed in a busy Mexico City neighborhood three years ago. The government blamed the crash on pilot error.
The yield on the country’s benchmark peso-denominated bond due in 2024 rose two basis points, or 0.02 percentage point, today to 6.45 percent, according to data compiled by Bloomberg. The price of the security fell 0.26 centavo to 131.25 centavos per peso. For the week, the yields climbed 12 basis points.
The benchmark IPC index rose 2.6 percent to 37,555.65 today.
"The interior minister is the facilitator among political players in the cabinet, but he is not the main strategist," said Carlos Ramirez, an analyst at Eurasia Group in Washington. "This is a personal tragedy, but the ramification in the economic realm is not relevant."
It’s the second weekly decline for the peso following a fall of 3.6 percent during the previous five-day period.
Europe’s Efforts
The currency gained earlier as Europe’s efforts to tame its debt crisis spurred more demand for higher-yielding assets, while data showed that the country’s industrial output grew in September.
Italy’s Senate approved a budget bill today, paving the way for a new government led by former European Union Competition Commissioner Mario Monti, while Greece will swear in Lucas Papademos to head a unity government. U.S. Treasury Secretary Timothy F. Geithner said yesterday Europe’s plan to deal with its crisis is a "good framework."
"It looks like Europe has dodged a bullet in terms of political instability both in Greece and in Italy," Marc Chandler, the New York-based chief currency strategist at Brown Brothers Harriman Co., said in a telephone interview "Mexico would be one of our favorite currencies to play catch-up."
Mexican Economy
Mexican policy makers said Nov. 9 in their quarterly inflation report that while the global economic slowdown has caused external shocks, "among emerging markets, Mexico stands out because of the solidness of its economic fundamentals and monetary policies."
Mexico’s industrial production rose 3.6 percent in September from a year earlier, the national statistics agency said today on its website. Economists had forecast an increase of 3.1 percent, according to the median estimate of 18 analysts surveyed by Bloomberg.
A Reuters/University of Michigan report released today showed that consumer confidence in the world’s biggest economy increased in November. U.S. jobless claims fell by 10,000 to 390,000 in the week ended Nov. 5, Labor Department figures showed yesterday.
"If good U.S. data keeps coming out it should help" the Mexican peso, Ramon Cordova, a currency trader at Base Internacional Casa de Bolsa in Monterrey, Mexico, said by phone.
--With assistance from Jonathan Roeder and Jose Enrique Arrioja in Mexico City, and Katia Porzecanski in New York. Editors: Glenn J. Kalinoski, David Papadopoulos
To contact the reporters on this story: Benjamin Bain in New York at bbain2@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
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