Exchanging Money in Oaxaca, Mexico: Last Year’s Dramatic Change to the Law

Last year marked a dramatic change in the ability of visitors to Mexico (and Mexican residents including business owners for that matter) to exchange their US dollars into pesos.

Traditional Methods Used for Exchanging Dollars into Pesos

Until May, 2010, Mexicans and international tourists alike were able to freely attend at the bank and exchange their dollars for pesos. Rates were posted, and it was simply a matter of comparison shopping and then transacting the exchange. For residents of the country, in particular those in the hospitality industry serving predominantly Americans (innkeepers, tour guides, restaurant owners, etc.), this was a key means by which business was conducted. It was particularly important in cities such as Oaxaca which rely on tourism for their very existence. Travelers would pay their accounts for accommodations in American dollars – sometimes as a result of having been quoted US dollar prices – and the beneficiaries of their money would simply go to the bank and exchange funds into pesos. Alternatively they would deposit dollars into their business (or personal) accounts, and the financial institution would do the conversion, generally using a preferred rate.

For tourists as well, it was often a case of comparison shopping, and then an unfettered exchange of dollars for pesos. For visitors to Mexico there was always the option of comparing rates at casas de cambio (storefront exchange houses) as well as banks. But for Mexicans, the banks were the better medium for exchanging dollars for pesos.

The Change in Mexican Rules and Regulations Regarding Changing US Dollars into Pesos, as Applied in Oaxaca

Now, a resident of Oaxaca for example, cannot simply exchange dollars into pesos in a bank, or deposit dollars into a personal account or even some types of business accounts. The business end of matters is complicated and beyond the purview of this article. But suffice it to say, Oaxacans must now either use casas de cambio (with a less attractive rate of exchange more often than not), or open the type of business account permitted by the change in rules.

For tourists to Oaxaca seeking to change dollars into pesos, while banks continue to post the rate of exchange, almost to a number they no longer do the exchange. This means that visitors are restricted to using casas de cambio, credit cards, or ATMs to obtain pesos.

While suburban Oaxaca branches of Scotiabank follow the new dictate and do not exchange dollars for pesos or deposit US dollars into a personal account, the main downtown Oaxaca branch of Scotiabank still does exchange dollars for pesos, at least for a non-Mexican with presentation of a passport and a copy of the photo page; and while after the new rule came into effect a Scotiabank representative advised that implementation of the new law “was imminent,” we’re still waiting for the Scotiabank branch to follow suit.

The Rationale for the Change in Law Regarding Exchanging Dollars into Pesos

Word on the street is that there are two primary reasons for the change:
• The change is designed to curb money laundering and adversely impact the ability of drug traffickers to carry on business.
• The change addresses the more general underground economy where individuals (business owners and operators) have been able to accept US dollars and simply attend at the bank to secure pesos, directly or through personal accounts.

The Actual Impact on Tourists in Mexico, including Oaxaca, of No Longer Being Able to Exchange Dollars for Pesos at Banks

For tourists to centers in Mexico such as Oaxaca, the impact will not be that significant on an individual basis. Yes, being restricted to attending casas de cambio means that travelers will no longer able to shop for the most competitive exchange rate to the same extent as before, because using the banks will no longer be available to them. Casas de cambio will now better be able to monopolize this segment of the tourist market.

Business owners now struggle with whether or not to continue to quote and demand US dollars, or the peso equivalent with a view to continuing their ability to carry on as before. They can attend at casas de cambio of course, but the rate of exchange will not be as attractive. And how long will it be until regulations are imposed on how casas de cambio conduct business in terms of requiring additional documentation from those using their services, and remitting information to government?