Exchange Rates And Puerto Vallarta Real Estate

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The double edge sword of the high dollar and how it affects your property in Mexico



Many people who have income in US Dollars get very happy whenever the US Dollar goes higher against the Mexican peso, as they think, and they are right, that for some time they have more pesos to spend in restaurants, grocery stores, and other entertainment. But the reality is that Mexico’s economy and the US economy are highly interconnected. Mexico imports a tremendous amount of goods from the US.  Therefore, as the US Dollar goes higher, so do the prices for gasoline, food, and many other goods.  Just because the US Dollar goes higher, it does not mean that the extra buying power will remain long term, it is just a very temporary thing and inflation then creeps in and we pay a lot more for things down here.  The rise of the US Dollar against the Mexican Peso over the last 10 years has benefited some, but also affected others deeply when it comes to Capital Gains Taxes when they sell their property.


For most American expat real estate transactions in Puerto Vallarta, the short answer is no, but there are exceptions.  The reason the answer is no is that most properties that interest expats in Vallarta are listed in US Dollars.  So, you pay the same amount in Dollars regardless of the exchange rate on a given day.  There are some Mexican owners who will sell their properties in Pesos, so there may be fleeting opportunities to buy from them, if you are interested in very Mexican neighborhoods.  Also, some of the developers currently finishing and delivering new condos here in Vallarta, are fixing the exchange rate (which in effect puts those condos on sale depending on the currency used to buy them).  If however, you are interested in Mexican real estate outside of tourist areas like Puerto Vallarta, where properties are bought and sold in Pesos, the stronger dollar could stretch your buying power quite a bit.



Many uninformed people think that because they bought and will sell their property in US Dollars, that stronger or weaker, the change does not affect them.

Since in Mexico the official currency is in Mexican Pesos, regardless of your property having been bought in US Dollars, and being advertised and sold in US Dollars, the fact is that when it comes to the Mexican Government, every single real estate transaction is in Mexican Pesos.

Let us look at a simple example for everybody to understand the concept:

Let’s say that you bought a beach front condo for $100,000 USD when the dollar was at 12 Pesos to 1 US Dollar. You paid the $100,000 USD you got your Trust (Fideicomiso) and you were happy. What your Realtor or legal representative may not have explained to you, is that on the Escritura or Title of the property, the price got recorded in Mexican Pesos. Therefore, you actually paid $1,200,000.00 Mexican Pesos for your property when it comes to the Mexican Government.

Now, you feel there is uncertainty, hard to find buyers and you just want your money back, so you tell your Realtor you want to sell and want your One Hundred Thousand back in your pocket. And let’s say that after Realtor fees you will end up with the One Hundred Thousand US Dollars back because the condo sold for $116,000.00 US Dollars, the 16 thousand go to pay Realty fees and you think you will get your One hundred Thousand back. Since you did not make any money, you should not have any Capital Gains Taxes.

But wait a minute, remember that for the Mexican Government the purchase of your property got recorded at $1,200,000.00 Mexican Pesos?  Now, the sale of your property will also get recorded in Mexican Pesos. The problem is that right now the exchange rate is at $22.67 Pesos to 1 US Dollar as of the writing of this article. Therefore, for the same $100,000.00 USD that you invested and you are getting back, based on the Mexican Government recorded sale, you will have sold your property for $2,267,670.00 Pesos.


This leaves you with a Capital Gain of $1,067,670.00 Pesos, for which you are responsible to pay Capital Gains Taxes.

Now, we are in a situation where the increase of the US Dollar against the Mexican Peso is having a very detrimental effect on your finances.

Also, remember that in Mexico the Notario closing the sale is the one responsible to collect Capital Gains Taxes at the time of the sale. I have had many clients who argue that they are not making any money, as they are only getting back their investment in US Dollars.  Please remember that you are in fact in a foreign country, and the local Tax requirements have to be met.

There are some strategies to lower those Capital Gains Taxes, and we at Exclusive Realtors work with the correct attorneys that may allow you to legally lower those Capital Gains Taxes by using strategies that fall completely under the Mexican Law, but also take into consideration your specific situation. Feel free to contact us and ask questions about this topic and any other that may be of interest.

Written by:

Hector Merino, Licensed RE Broker AMPI; NAR

With Exclusive Realtors