As a result, Mexico’s state-owned oil company, Pemex, has not been selling USD to Banco de México as it did before, so the traditional main source to accumulate international reserves has waned. In this environment, the FX Commission needed a mechanism to prevent international reserves from decreasing, while supplying foreign currency, so it introduced in 2017 non-deliverable forward auctions settled in Mexican pesos.
All in all, Mexico’s floating exchange rate regime strategy, along with upgrading international reserve management and FX interventions, contributed to support the development of a deep and liquid FX market, with an efficient price discovery process both at normal times and during stress episodes.