Economical overview
The ancient agricultural land of Mexico is
still one of the world's leading corn and vegetable
growers, but since the beginning of the 20th century,
oil extraction and later industry have become
increasingly important to the economy. Nevertheless,
trade and services, including tourism, now constitute
the majority of the gross domestic product.
Mexico is classified by the World Bank as an "upper
middle income country" and in 2018 was ranked as the
world's 15th largest economy. The official economy is
highly integrated with the outside world, and not least
with the US and Canada, and is characterized by highly
productive manufacturing. However, there is also a
significant "black" sector. Between one third and half
of the total economic activity is estimated to take
place in the informal sector. It contains everything
from drug trafficking to shoe shoveling. Well over half
of the residents support themselves through work outside
the tax system and an almost equal share of the
population is considered poor.
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Countryaah.com:
Major imports by Mexico, covering a full list of top products imported by the country and trade value for each product category.
In recent decades, Mexico has deliberately invested
in manufacturing, not least car manufacturing, to reduce
its dependence on oil. Mexico has succeeded better than
many other oil producers, which has been an advantage
over the declining oil prices of recent years.
The oil decreases in importance
The state-owned oil company Pemex (Petróleos
Mexicanos) was a dairy cow for the state for a long time
and until recently provided a third of the revenue. At
the beginning of 2017, however, the oil accounted for
less than one-fifth of the state's revenue and only
around 5 percent of exports. Oil recovery has been
declining every year since a peak in 2004 and is almost
down to half of what it was then (see also Natural
Resources, Energy and the Environment).
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including MEX which represents the country of Mexico.
In 2014, a controversial reform of the energy sector
was completed, which opens up for foreign investors.
Since 1938, Pemex had had a monopoly on all aspects of
oil extraction, which was considered almost sacred to
many Mexicans. Political opposition is strong against
anything resembling privatization.
Naphtha and T-MEC
The free trade agreement Nafta concluded with the US
and Canada in 1994 resulted in increased access to the
US market, but also increased competition. Nafta
contributed to a rapid increase in export-oriented
industry in Mexico, as well as to the establishment of
assembly plants, maquilas, along the US border.
Maquila's exemption from, among other duties, duties and
benefits from being able to employ low-wage workers with
few rights.
Following Donald Trump's resignation as President of
the United States in 2017, Nafta became the subject of
renegotiations, as Trump claimed that the agreement
disadvantaged the United States (see further Foreign
Policy and Defense). In August 2018, Trump stated that a
new free trade agreement was reached with Mexico and the
following month there was an agreement that also
included Canada. Trump called the US-Mexico-Canada
Agreement (USMCA) but Mexico's incoming President Andrés
Manuel López Obrador stated that it is not possible to
pronounce in Spanish and instead launched T-MEC (Spanish
for the Mexico-US-Canada Agreement). Mexico ratifiedthe
agreement in June 2019, but opposition continued to be
strong, especially in the US Congress, where Democrats
demanded better labor law guarantees. It ended with
adjustments and a new agreement signed by the parties in
December and shortly thereafter ratified by Mexico. In
the US and Canada, ratification was completed in January
and March 2020 respectively.
Other agreements
In addition to Nafta / T-MEC, Mexico has signed about
ten free trade agreements with a total of around 45
countries in three continents. With the EU there is an
agreement since 2000. Mexico has one of the world's
largest networks of free trade agreements, and over 90
percent of trade is done within them.
Mexico was also present when twelve countries around
the Pacific signed the Free Trade Agreement TPP
(Trans-Pacific Partnership) in 2016. One purpose of the
agreement was to counterbalance China's dominance in
Asia. In its original form, the TPP would have covered
40 percent of the world economy, but it failed before it
came into force when the US withdrew after Trump's
entry. However, the remaining eleven countries decided
to stick to the agreement. They together account for
about 14 percent of the world economy and have a total
population of over 500 million, which is more than the
EU. After some adjustments, they signed in March 2018
under the TPP-11, or CPTPP (Comprehensive and
Progressive Agreement for Trans-Pacific Parthership).
The agreement means that tariffs will be lowered between
the countries and, according to the hopes, will
contribute to increased growth. CPTPP includes economic
heavyweights such as Japan, Canada and Australia. The
other Latin American countries in the CPTPP are Chile
and Peru.
Money from exile Mexicans
Mexicans working in the United States make an
important contribution to the home country's economy.
The remittances stood at just over 2.7 percent of GDP
in 2016 and were thus back on the previous peak
quotation reached ten years earlier. Money shipments are
estimated to have been oil in 2015 as the largest source
of foreign currency. In addition, the money often goes
to poor families who thus get a little better off.
Mexico is also trying to increase its foreign trade
with other countries so as not to be too dependent on
the US economy. The fairly low wage situation in Mexico
is an advantage when the industry seeks new markets.
Competition has been felt from China, for example, where
wages have been even lower, but now costs in China have
increased and Mexico is again interesting for production
in the US market.
One problem that hinders growth is the low tax
collection. Tax revenues are around 17 percent of GDP,
which is half of the OECD average. Since the end of the
1990s, growth has averaged around 2 percent. However, in
2019, growth was below zero, according to the National
Statistics Office. It was the first time since the
global financial crisis ten years earlier that growth
was negative.
FACTS - FINANCE
GDP per person
US $ 9,698 (2018)
Total GDP
US $ 1,232,809 million (2018)
GDP growth
2.0 percent (2018)
Agriculture's share of GDP
3.3 percent (2018)
Manufacturing industry's share of GDP
17.0 percent (2018)
The service sector's share of GDP
60.2 percent (2018)
Inflation
3.8 percent (2019)
Government debt's share of GDP
53.6 percent (2018)
External debt
US $ 455,058 million (2017)
Currency
Mexican peso
Merchandise exports
US $ 451,054 million (2018)
Imports
US $ 464,850 M (2018)
Current account
- US $ 21,643 million (2018)
Commodity trade's share of GDP
76 percent (2018)
Main export goods
oil, motor vehicles, electronics, agricultural
commodities
Largest trading partner
USA, China, Canada, Japan, Colombia, South Korea,
Germany
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