[cmyden]

Here's the scoop...

First Air Canada sent out a press release that contained the following...

Mexico Announces new, peso-only policy

Montreal - September 15, 2010 - Effective September 14, 2010, all vacationers travelling to Mexico will be required to use Mexican pesos, as it will be the only currency accepted. American and Canadian dollars will no longer be accepted in the country.

The use of international credit cards is unaffected as transactions will continue to be processed in Mexican pesos, as per current practice.

It is recommended that travellers bring Mexican pesos and/or credit cards to avoid difficulties.

And then changed it to this ...

Montreal, September 16 ,2010

Effective September 14, 2010, the Mexican government will cap the amount of dollars foreigners can exchange for pesos in banks and currency exchange establishments to no more than 1500 USD per month.

The use of international credit cards is unaffected as transactions will continue to be processed in Mexican pesos, as per current practice.

The measure will not affect the amount of cash (in Mexican pesos) an international tourist can withdraw from an ATM machine on a daily or monthly basis.

It is recommended that travellers bring Mexican pesos and/or credit cards to avoid difficulties.

but here's a release that explains the situation in more detail...

SUMMARY

Mexico’s bank limit hinders the use of US Dollars in Puerto Vallarta affecting retirees

On July 2010 a new Mexican banking regulation was implemented by Mexico’s Secretaria de Hacienda (equivalent to the IRS) that severely limits the liquidity of US greenback in Mexico.

As an unintended effect, It reduces the tourist industry’s ability to accept US greenbacks for payment. Therefore, international travelers and retirees will have to find other alternatives to pay for their expenditures in Mexico.

NEW ANTI-MONEY LAUNDERING REGULATION

The purpose of the new regulation is to hinder illicit money laundering of US Dollars, which were being depositing in Mexican bank accounts in very large quantities. Read more about this anti-money laundering regulation in a CNN article.

NEW BANK LIMITS ON US DOLLAR FOREIGN EXCHANGES AND DEPOSITS

Under the new regulation, international tourists can exchange US$1,500 per month at a Mexican bank by showing their passport.

Local bank account holders can deposit US$4,000 per month into their peso-denominated bank account. The limit for businesses is a little higher, around US$7,000 per month. A person without a bank account (such as your typical home worker) can exchange US$500 per month; but it’s nearly impossible to find a bank willing to accept this non-client transaction.

HOW IS THIS AFFECTING THE TOURISM INDUSTRY?

As an unintended effect of the banking regulation, Mexico’s travel destinations, such as hotels in Puerto Vallarta, Cancun, Playa del Carmen and Los Cabos are limiting the acceptance of US Dollars.

These foreign exchange limits make it more difficult for locals to convert the US greenback to pesos in Mexico. For example, a five-star hotel at a vacation destination may receive much more than the allowable monthly $7,000 US Dollar limit in just a single day. The hotel manager, however, needs to pay its employees and suppliers in Mexican pesos, creating a serious Peso imbalance for the hotelier.

Hotels are beginning to feel the cash crunch and are limiting their guests’ exchange of US Dollars to minimum courtesy amounts.

AM I BREAKING THE LAW IF I DO BUSINESS WITH US DOLLARS IN MEXICO?

The use of US dollars in the economy is not prohibited, or limited in any manner. The banking regulation only limits exchanging or depositing US Dollars into Mexican bank accounts. Therefore private citizens and “casa de cambios” continue to accept US Dollars and operate in the foreign exchange business throughout the country.

Many large supermarkets such as Wal-Mart, Soriana and Chedraui continue to accept payment in US Dollars at quite favorable exchange rates.

Other entrepreneurs, such as tour operators, taxi drivers, boat ride owners and ride amusement managers, continue to accept US Dollars, albeit at higher-than-normal exchange rates.

WHAT IS THE BEST WAY TO PAY FOR GOODS AND SERVICES WHILE TRAVELLING IN MEXICO?

The best way is to use your US bank’s debit card to withdraw Mexican pesos at a local ATM machine. For more details, see our article on The best way for retirees to get cash from their overseas bank to Puerto Vallarta. This article compares alternatives such as using traveler checks, US issued credit cards and US greenback.

Short summary: Since locals will have a harder time exchanging USD, they will be less likely to accept it.

cM