Mexico’s central bank is buying pesos in the foreign-exchange market after the currency plunged to a record low today, the bank’s press office said. A joint central bank and Finance Ministry committee decided Banco de Mexico would “inject liquidity,” according to an e- mail sent by the central bank’s press office. The intervention is an “extraordinary” measure beyond the bank’s normal offer to buy $400 million worth of pesos a day, the press office said. The central bank stepped into the market after the peso tumbled to a record for a fourth day. Today’s intervention adds to the $16.6 billion of foreign reserves that central bank Governor Guillermo Ortiz has spent to prop up the peso since the global financial crisis sent it tumbling in October. “They have to be aggressive, they have to do it on a number of occasions and use larger amounts” to support the peso, said Francisco Diez, director of foreign-exchange trading at RBC Capital Markets in Toronto. Mexico’s peso rose 0.9 percent to 14.4396 per U.S. dollar at 5 p.m. New York time, compared to 14.5708 yesterday. It had slumped as much as 0.9 percent earlier to 14.7059, a record low. ‘Learned How to Play’ The peso has weakened 32 percent against the dollar over the past six months, the second-worst performance among the world’s major currencies after Brazil’s real, on concern the economy will sink into recession as demand in the U.S. falters for Mexican exports. Mexico’s economy will shrink 1.16 percent this year, according to the average estimate of 31 economists in a monthly central bank survey published yesterday. Mexico’s economy last contracted for the full year in 2001, when it shrank 1.6 percent. Banco de Mexico bought pesos directly from banks today, the first time it intervened in the foreign-exchange market without using an auction system since 1998, said Gabriel Casillas, an UBS AG economist in Mexico City. “The market learned how to play” the daily auction system, said Maya Hernandez, a currency analyst with HSBC Holdings Plc in New York. “It wasn’t having any impact at all.” Mexico’s central bank sold a record $6.4 billion in the currency market on Oct. 10 as it stepped up its bid to quell the rout that threatened to bankrupt companies. Controladora Comercial Mexicana SAB, Mexico’s third-largest supermarket chain, has filed for bankruptcy protection at least three times since October, saying it had liabilities of $1.1 billion from wrong-way bets on the currency. Cemex SAB’s share price has plunged 36 percent since the end of September on concern the peso’s weakness will hurt its ability to service its dollar debt. Inflation Outlook Ortiz is trying to shore up the peso in a bid to rein in inflation, said Diez. Ortiz said last week in an interview in Davos, Switzerland, with Televisa television network that he’s concerned the weaker peso is fueling inflation. Annual inflation climbed to a seven-year high of 6.5 percent in December. Grupo Bimbo SAB’s $2.4 billion purchase of George Weston Ltd.’s U.S. operations on Jan. 22 also has contributed to the peso’s decline because the company sold pesos for dollars to complete the transaction, Casillas said. Local pension funds also sold pesos for dollars to buy some of the $2 billion of 10-year notes that state-owned oil company Petroleos Mexicanos sold Jan. 27, he said. The U.S. Federal Reserve yesterday extended a $30 billion foreign-currency swap line agreement with Mexico by six months thorough Oct. 30, citing “continuing substantial strains in many financial markets.” ‘Line in the Sand’ Mexico won’t follow Russia’s example of trying to maintain the currency at a specific level in the face of overwhelming market skepticism, said Win Thin, senior foreign exchange strategist at Brown Brothers Harriman & Co. in New York. Russia “bungled by trying to draw a line in the sand,” Thin said “Emerging market currencies won’t see any relief till crisis is past.” Russia’s central bank expanded its trading range for the ruble 20 times since mid-November before policy makers switched on Jan. 22 to let “market” forces help determine the exchange rate within a widened limit. The central bank drained more a third of its foreign-currency reserves, the world’s third largest, since August to stem the ruble’s 34 percent slide against the dollar. Mexican policy makers aren’t “defending any particular level, but just trying to prevent things getting out of hand,” Thin said. To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net; Hugh Collins in Mexico City at hcollins8@bloomberg.net Last Updated: February 4, 2009 17:27 EST

A slightly odd title perhaps, but for many Balinese, this is what these carvings represent - their next meal. Whilst around Ubud, we saw a good number of places selling things like this, but that just represents the tourist end of this particular market. You'd see the occasional small workshop where someone would be carving out a lump of wood; log trapped against a post with their feet as they'd saw away, perhaps to reduce its size down for whatever came next, but at the time it didn't really register what we were seeing - just another local curio in many ways. It wasn't until we made a trip up to the volcano at Kintamani, and specifically the trip back to Ubud, that the enormity of how a sizeable proportion of the Balinese economy is being run, became clear to us. At the top of the road back down from Kintamani, we started to see, first, isolated examples of the wood carvers trade being performed in what are no more than open-sided roadside shacks. As the descent progressed though, more and more of these places appeared, maybe two or three crowded together, then a small hamlet with a row for a few dozen yards. After a while though, the wood carvers gave way to those painting up what appeared to be purely souvenirs to us, then the shops and before you know, there seems to be nothing on the road except for outlets selling what must be hundreds of thousands, probably millions of these things; wooden cats, buddhas, mirror tiled pottery, carved items of all shapes and sizes and so on. After a few miles it dawned on us that what we were witnessing was no more or less than a factory shop floor, but one set in rural Balinese countryside. All these thousands of individual businesses all competing for their own individual slice of trade, but trade with who? There was far too much of it to be going into the tourist market on the island. Talking to our taxi driver quickly revealed that this was all being produced for the export market; the big department chains, garden centres, home furnishing outlets and who knows what other sort of shops. That taxi journey perhaps took 45 minutes to an hour to drive and at an estimate, I would say that for 3/4 of it, we were surrounded by this industry. It was if we'd driven though a bees nest or encountered the Borg, so pervasive was it, the scale of the activity barely comprehensible. It's very difficult to assess whether what we were seeing was a good or a bad thing. It was clearly contributing to the local economy and bringing in much needed foreign currency to the island. On the other hand though, the conditions in which the people involved were working in were so far below anything anyone reading this is likely to experience, it was way past scary. All I know is that I was stunned and not a little horrified at seeing how the global demand for consumer goods manifests itself on a island as beautiful as Bali.