![]() The Internal Revenue Service has no official exchange rate. See section 988 of the Internal Revenue Code and the regulations thereunder. dollar, make all income determinations in the QBU's functional currency, and where appropriate, translate such income or loss at the appropriate exchange rate.Ī taxpayer may also need to recognize foreign currency gain or loss on certain foreign currency transactions. If you have a QBU with a functional currency that is not the U.S. The only exception relates to some qualified business units (QBUs), which are generally allowed to use the currency of a foreign country. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item. dollars if you receive income or pay expenses in a foreign currency. Therefore, you must translate foreign currency into U.S. ![]() You must express the amounts you report on your U.S. As a long-established shelter and administrative services provider, CPI provides innovative solutions to maximize manufacturer’s margins by operating in Mexico.Translating foreign currency into U.S. If your company is considering moving or expanding manufacturing operations in Mexico, Co-Production International provides labor cost savings analysis at no charge. The time is right to take advantage of both currency exchange rates and the low-cost, highly-skilled workforce Mexico has to offer. The peso’s long-term trends are a crucial to analyzing the viability of successful foreign operations. Corporations cannot manufacturer in Mexico without considering the currency. The end result means stronger financial statements for nearshore operations.Ĭarranza believes it is this type of value-added service that will allow manufacturers in Mexico take an innovative and dynamic approach to operating in the country. By determining what a corporation is willing to risk or gain, they can make smart decisions based on their overall business strategy. For manufacturers in Mexico, this would allow them to know and measure the risks they are willing to incur. With his long history in finances, Carranza has begun to develop strategic planning tools for corporations who wish to analyze and plan for hedging the currency exchange market. Labor cost in Mexico went from being 200% more expensive than labor cost in China, to an impressive 19.6% difference today.Īdding in transportation, logistics time and costs, manufacturing companies are finding manufacturing in Mexico is dramatically less expensive, even with the growing gap in labor wage. Carranza explained that with the global price of oil dropping over the last two years, Mexico has seen the peso go from twelve pesos on the dollar to upwards of eighteen.China. With much of Mexico’s economy dependent on its nationalized petroleum industry, the peso becomes heavily dependent on oil prices. Twenty years ago, the Mexican peso, though significantly devalued against the dollar, was fixed and offered no opportunities to hedge against it for a greater return. ![]() Having worked in Latin America, the United States and Europe, his expertise in global currency markets will give dynamic insight into how manufacturers can hedge the peso devaluation in Mexico. Then the rates started escalating to 16.06 pesos in 2015 and reaching a new low of 18.50 pesos to a dollar in 2019. Mexico’s peso started at 12.50 pesos to the US dollar in 2013 down to 13.29 pesos in 2014. Modern peso and dollar currencies have a common origin in the 15th–19th century Spanish dollar, most continuing to use its sign, "$". ![]() The Mexican peso (sign: $ code: MXN) is the currency of Mexico. Companies manufacturing in Mexico are finding that the cost of labor and fixed expenses continues to reduce their overhead costs as the peso declines and the dollar value in Mexican pesos increases. Major banks are now posting the peso between 18 and 19 pesos to the dollar, leading Co-Production International to explain the benefits of Mexican peso devaluation for nearshore manufacturers. Fixed expenses such as labor, electricity and industrial facility leasing, are in Mexico currency allowing manufacturers to realize savings.īy working with a shelter manufacturing services provider like Co-Production International, the currency exchange fluctuations can improve your bottom line when exchanging dollars in Mexico to purchase local goods and services. When evaluating a potential site for manufacturing operations the value and stability of the currency is an important factor. Carranza has over 20 years’ experience in financial planning, treasury management and hedging strategies. Co-Production International spoke with Antonio Carranza, Finance Director and CFO for Goodridge Ltd. ![]()
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