Uncommon arbitrage makes for safe currency bet

Looking for a sure-fire way to make a buck, or few pesos at least? The answer lies in the exchange bureaus at Mexico City’s airport, according to a report from Bloomberg, which has identified some pretty hefty discrepancies between rates offered in the terminal.

According to the news provider, there is a three per cent difference between the rates offered at exchange houses and local banks. It means it’s possible to buy dollars at the exchange dealer and then turn an instant profit by depositing these nearby with banks.

A reporter bought dollars at the Mexico City airport for 13.85 pesos and then sold them back to a bank for 14.3 pesos on the same day.

It’s all to do with strict anti-money laundering rules that mean currency brokers would rather flog dollars on the cheap than deposit them with banks. Officials are said to be aware of how the rules affect currency brokers and the regulator is working on a solution.

But before you start booking your tickets to Mexico, there are limits to the kind of profits that can be turned through this rather unusual form of arbitrage.

A $4,000 limit is placed on dollar deposits and banks will only buy the greenbacks from people who already have an account. Bloomberg’s analysis suggests you’d be able to make no more than about $125 a month at best. Money for nothing, but probably not worth the hassle.

The peso lost around 12 per cent in the fourth quarter of 2014 and is being pressured by the collapse in oil prices.

Mexico’s central bank held interest rates at a record low in January amid fears about what a weaker peso could do to inflation in the country. The benchmark rate was left at three per cent but most analysts see a rate hike coming this year as the Federal Reserves sets its sights on tightening some time in 2015.