Mexico - Economy

The National Flag of

MEXICO

GDP ranks 14th on a Global Scale

TRANSITION

First Major Transition:

Replacing a primarily agricultural based economy to an industrial based economy.

TRANSITION

Second Major Transition:

Shift from closed economy to an open economy.

North America Free Trade Agreement

Energy industry is open to foreign investment.

TRANSITION

Third Major Transition:

Increasing private ownership and reducing public ownership throughout the economy.

1. Illegal Drug Trade• Violence and Corruption

2. Illegal Immigration• Tensions along borders• Labor force issues

International Economic Issues

STATISTICS

•Economic Sectors:– Agriculture, Industry and Service.– Service sector makes up 60%

•Natural Resources– Petroleum, Silver, Gold, Copper, Lead, Zinc,

Timber

STATISTICS

• Unemployment and Inflation– Unemployment 5.18%– Inflation 4.15%

• GDP– 14th largest nominal GDP– 1.26 Trillion Dollars– Growing at around 1%

Unemployment

Inflation Rate

Mexico GDP

TRADE

• Trade is mostly done with the United States.

• Imports: Machines and Industrial equipment.

• Exports: Agricultural and manufactured goods

• FDI in telecommunication and energy.

International Trade Between U.S. and Mexico

Trade in goods is eight times 1990 levels

International Trade Between U.S. and Mexico

Trade Openness & Protectionism Today

• Experienced huge trade liberalization from 1989 to 2000

– Affected domestic process and labor income differently both across income groups and geographically diverse groups.

– Lowered relative process of non-animal agricultural products and reduces households’ agricultural income.

• Widening the gap between rural and urban areas.

Daily Wages

Trade Openness & Protectionism Today

Additional Results:

–Had a diverse effect on wage rate• Skilled workers have experienced an increase in

wages• Wages of unskilled workers have decreased• States closer to the United States border gaining

threefold more than the lesser developed states in the south.

–Poverty• Reduced poverty by about 3%; bringing 3 million

individuals out of poverty.

FDI and Migration Policies

• One of Mexico’s main points in writing the NAFTA agreement is that an increase of FDI will decrease Mexican immigration to other countries.

• On average doubling of FDI will lead to

1.5 – 2% decrease in migration.

• Mexico doubled FDI from 2012 to 2013 with nearly 35.2 Billion.

Changes in Mexico’s Trade and FDI

Past

•Agrarian Society

– Population devoted to the production and exportation of agriculture

– In 1970, agriculture accounted for 25% of Mexico’s GDP

•Dominated by state owned enterprises

– Managed by the Mexican elites

•Closed economy

Present

•Industrialized

– Strong producer of electronics and automobiles

– Is now considered the 16th largest exporter in the world

•Agriculture now accounts for only 3.9% of Mexico GDP

•Has joined the ranks of other modern economic powers

– Canada, South Korea and Australia.

CAUSATION

• Market Structures

– Liberalization and privatization of various industries

• Have partially privatized Mexico’s Oil industry to attract FDI. 

• Technologies

– Have improved infrastructure immensely over the past 20 years

• Has allowed more efficient migration of domestic labor 

• Political Factors

– Cartels have distorted the influence of their judicial system

– Limited foreign investment

International Engagement

• Free trade Agreements (FTA) have been one of the primary reasons behind Mexico’s recent economic growth and emergence as a low supplier of goods.

– 12 free trade agreements among 40 countries

– Covers about 90% of their trade

• NAFTA

– Increase trade and FDI between Mexico and the US• Exports and FDI tripled and productivity in Mexican

manufacturing rose 80% in the early 1990s

– At the cost of increased trade, domestic firms and investment decreased

• Domestics firms could not compete against subsidized US imports