MEXICO: Down Goes the Peso

By Latin American—or indeed any—standards, the Mexican peso has been a remarkably stable currency. Since 1954 its exchange rate has not budged from 12.5 to the dollar. Mexicans were understandably astonished, therefore, when Treasury Minister Mario Ramon Beteta suddenly appeared on their TV screens last week to announce a change. From now on, he said, the peso would float freely—in other words, its value would be determined by supply and demand.

Though Beteta was careful to avoid saying so, the move amounts to a massive devaluation. By week's end the exchange rate sank below 20 pesos to the dollar. That might...