May 31, 2012 Update:

The Peso is now at 14.4 to the US Dollar. While prices have generally risen in Mexico since our post in 2008, they haven’t risen as fast as the Peso has dropped compared to the Dollar. Meals and activities in Mexico are less expensive than they were several months (and years) ago.

October 9, 2008:

The Mexican Peso is in a freefall these days.  Just a week ago it was about 10.6 to the dollar.  Now it’s 13.5 to the dollar.

Visitors to Mexico are now enjoying essentially a 25% discount.  For example, last month a dinner priced at 250 pesos would cost about US$23.80.  Now, that same meal is US$18.50.  That is, until prices are raised by the locals to make up for the decline in the Peso.

Keep in mind that Cabo San Lucas is one area of Mexico probably tied more to the US Dollar than any other part of Mexico.  As such, prices will probably be adjusted quickly at tourist-oriented shops and restaurants.  The main-line grocery stores and shops probably won’t adjust their prices for awhile — at least until they start losing money.  Inflation (that’s what this is, when a currency declines in value vs. another) usually lags.