Mexico Economy Research

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Mexico

Key Findings

Mexico’s official Latina name is Estados Únidos Mexicanos which translates to the United

Mexican States. The country is portrayed as poor due to a large number of illegal Mexican

Immigrants in the United States, on the contrary, the country is rich in culture and economically

as well. The Mexican-United States border is the world’s second largest border after that of

Canada and United states. Mexico’s largest city is its capital, Mexico City which has a

population of 20.45 million. The country uses the Mexican peso as its main currency. Mexico is

widely known for drug trafficking and crimes related to drugs. The country records up to 30,000

annual violent deaths related to drugs and drug trafficking (Zea, Leopoldo, page 13). However,

the government is trying as much as possible to reduce these incidences so as to improve its

relations with other countries. In 2014, Mexico arrested the world’s most wanted drug cartel,

Joaquin Guzman Loera, in Mazatlán town. Joaquin was ranked among the world’s most

powerful people as he had control over several drug barons and drug traffickers (Zea, Leopoldo,

page 13). He was arrested and sentenced to 40 years in prison for several crimes and drug-related

charges.

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Executive Summary

Located in North America, Mexico is the world’s 10

largest country with an area of 1,972, 550

square kilometers (Rumney, Thomas, page 65). The country is bordered by United States of

America, Belize and Guatemala, to the north and south-east respectively. Its official name is the

United Mexican States as it is made up of a number of states. The country’s capital city is

Mexico City. The country has a population of about 121.57 million people (Rumney, Thomas,

page 65). There is a false stereotype that the country is poor due to the great number of emigrants

to the United States. On the contrary, Mexico is a rich country with a lot of cultural heritage.

According to statistics carried out in 2014, the country recorded an urban population of 79% and

rural population of 21% of the total population (Rumney, Thomas, page 66). The people in the

country have healthy lifestyles that enable them to live long. The life expectancy of men is 72.9

years while that of women is 78.6 years (Rumney, Thomas, page 66). This is above the world’s

average, which is 68.2 year for males and 73.2 for females (Rumney, Thomas, page 66).

Mexico has no official religion. However, most of its citizens are Roman Catholics

(Rumney, Thomas, page 73). They occupy 88% of the country’s population, followed by

Evangelicals and Protestants, who occupy 8.7% of the population (Rumney, Thomas, page 74).

As such, laws are not set based on any religion, but set to accommodate all religions in the

country. The country has great sceneries and a very good natural landscape which makes it a site

for tourist attraction.

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Introduction

Mexico is one of the countries in the world that is rich in culture. The citizens really cherish their

roots and have various celebrations making different festivals. The country is mostly occupied by

Latinos. Spanish is the most widely spoken language in the country. There are 6 other Indian

languages spoken throughout the country in the small villages. Also, it has the second highest

number of Roman Catholics after Brazil. Nevertheless, there is no official religion in the country.

The citizens are allowed to practice the religion of their choice. Mexico has several tourist

attraction sites including, beautiful scenery and rich culture. Texas was formerly a state in

Mexico, it was later taken by the United States after a war between the two countries. The

country has managed to maintain an excellent network of communication and transport among

its citizens due to its thriving economy.

Overview of Political Situation

Type of Government

Mexico is controlled by a federal government (Edmonds-Poli, Emily, and David, page 128). This

means that the there is a central government that divides its power to smaller local governments.

A federal government is composed of three arms: the judicial system, the legislative system, and

the executive system. The judicial system is made up of the courts and the court's systems. Their

purpose is to ensure that laws are followed to the latter. They are the watchdogs of laws. They

listen to and make rulings regarding law breakings. The legislature is the law making system of

the government. Its main purpose is to make laws. The executive’s main purpose is to execute

laws that are made by the legislature. This arm is composed of the president, the vice president

and other officials like the Attorney general.

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Major Political Parties

Mexico practices the multiparty system of government. The political field of Mexico is mainly

dominated by three parties; Institutional Revolutionary Party (PRI), National Action Party (NAP)

and Party of the Democratic Revolution (PRD). There are several other small parties that are in

alliance with these three major ones. Founded in 1929, PRI was the political party in power, up

to 1988. This party ruled Mexico for the majority of the 20

century. Over this time, PAN, which

was formed on 1939, was the opposition party. It offered such as strong opposition that kept PRI

on toes. Most of the members in this party were Roman Catholics and entrepreneurs (Edmonds-

Poli, Emily, and David, page 129). PRI had suppressed some business and catholic rights. PAN

came up to defend this right and offer equality to everyone. However, PAN never managed to

win any election until 1989.

Government since World War II

The World War II had a great impact on the government and economy of Mexico in general.

During the war, Mexico provided the United States with weapons. These two countries signed an

agreement in November 1941 whereby Mexico agreed to provide the United States with

weapons of the war. This agreement was a big deal for the two countries as they were at

loggerheads previously. However, the agreement gave them a common ground thereby resolving

most of their conflicts. The war significantly contributed positively to PRI’s development of the

economy (Edmonds-Poli, Emily, and David, page 128). In fact, the population of the country

grew significantly as its economy nourished. This political party gained a lot of power after the

war. They sprawled several industries especially agricultural based industries into performing

better. However, suppressed the rights of business people. Also, the attempted to diminish

catholic religion. The PAN came into existence in order to defend the rights of these groups. This

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was the second political party to be formed. It paved way for the formation of other political

parties. PAN formed a very strong opposition to PRI as they had not won any election since its

formation. During this period, there was a lot of political unrest in the country. The United States

developed a cold war on Mexico to avoid any sort of conflicts. However, during the 1989

elections, PAN managed to gather majority votes and formed the government.

Current Government

Currently, Mexico is governed by a federal government with Enrique Peña Nieto (2012-2018) as

the president (Edmonds-Poli, Emily, and David, page 133). The president is both the head of

government and chief of state. All the three arms of government are located in its capital city.

Major Political Risks

The major political threat in Mexico is drugs. Mexico is one of the countries with the highest

number of drug traffickers and barons. Most of the people involved are prominent people in the

society. The war on drugs is a very dangerous yet delicate war as it can get several people

assassinated or attacked. Also, it poses a high risk to potential investors as people fear for their

lives. Other political risks include poor leadership and oil contracts.

Overview of the Economy

Size

The World Bank ranks Mexico as the second largest economy in Latin America. The country

recorded an increase of 2.5% in its economy between the year 2015 and 2016 (Cypher, James,

and Wise, page 27). However, due to the economic construction of 2016, its economy is

expected to slightly decline. In 2015, the country’s Gross Domestic Product per capita was 9,431

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dollars (Cypher, James, and Wise, page 27). Its actual GDP was 1, 142 billion dollars. Its

economy is ranked 13

worldwide in relation to its GDP. The country has managed to sustain its

population in terms of employment. It has one of the lowest rates of unemployment worldwide at

4.3%.

Top Industries

The most dominant industries in Mexico are food and beverages, chemical, and tobacco. Other

excelling industries include aerospace, electronics, mining, textile and clothing industry and

tourism. These industries contribute highly to the county’s GDP. The service industry is the most

active industry in the country. It contributes 63% of the Gross Domestic Product (Cypher, James,

and Wise, page 28). The assembly industry contributes 33%, manufacturing contributes 18%

while agriculture contributes 7% of GDP.

Post World War II Economic Development

After the World War II, the president of Mexico at the moment insisted on developing the

country’s economy so as to make it self-sufficient. During 1970, Mexico started producing

petroleum (Cypher, James, and Wise, page 29). However, this plan did not go well as the country

accumulated a lot of debt while exploiting the petroleum. Following this incident, the prices of

petroleum and petroleum products were reduced. Later on, the country joined NAFTA which

helped it to re-organize its economy. The United States assisted Mexico by preventing the

closure of private banks.

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Current Economic Environment

Exports are the main contributors to the economy of Mexico. The country is ranked 12

in terms

of exports. The majority of the goods are exported to the United States and Canada. The country

produces up to 3,000,000 barrels of oil daily making it the world’s 8th largest oil producer

(Cypher, James, and Wise, page 29). Mexico’s economy attracts a lot of foreign investors.

However, some people are afraid of investing in the country due to the issue of drug trafficking

and security.

Major Economic Risks

Although the country has one of the best economies worldwide, it faces a number of challenges.

Among these challenges include corruption, inflation, and security. Security is the major threat to

its economy. Mexico is known to harbor several drug barons and users (Callcott, Wilfrid, page

21). These people are a great threat to the national security due to their violent activities. Were it

not for corruption, most of the drug cartels would be behind bars. The government, however, is

not serious when it comes to this issue. If it takes matters into its hands, most of the traffickers

will be arrested thereby increasing the country’s security, consequently its economy.

Overview of Mexico’s Economy with the Rest of the World

Top Trading Partners, Exports and Imports

Mexico is an active trade member as it has a lot of production enough to sustain itself and remain

with a surplus. The most active trade partners of Mexico include United States, Canada, China,

Brazil, Colombia, Germany, Spain, Italy, Thailand, Japan, South Korea and France. The most

active trade partner of Mexico is the United States with 81% exports and 48% of the imports

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(OECD Economic Surveys, page 13). The bulk of Mexico’s export is Motor vehicles and parts.

This comprises of 23.7% of the exports. Other exports include electrical and industrial

machinery, oil and mineral fuels, precision instruments, furniture, and vegetables. The country

mostly imports electrical and industrial machinery, motor vehicle and parts, organic chemicals,

iron and steel and plastics. The country’s imports currently stand at $428 billion while the

exports stand at $404 billion (OECD Economic Surveys, page 13). The country is very active in

the trade market worldwide. It recorded a total merchandise of 68.7% of its GDP in the year

2005.

Current Account Situation

The current account is given by the sum of the balance of trade, which is the difference between

the exports and imports. For a country attain a good current account status, it needs to have a

proper balance of trade. This means that the exports need to be more than imports so that it may

make a profit, thereby contributing positively to its revenue. The account status of Mexico has

decreased from 7.52 billion dollars in early 2016 to 3.36 billion dollars in late 2016. The income

for goods has decreased from 3.78 billion dollars to 0.66 billion dollars (OECD Economic

Surveys, page 13). Among the activities which contribute to the country’s economy are exports,

imports, tourism and minerals. However, 2016 has seen the country’s worst ever economic

decline.

Free Trade Agreements

Mexico has a total of 10 free trade agreements with up to 45 countries (OECD Economic

Surveys, page 15). The country is an active participant in multilateral organizations such as

World Trade Organization and Organization for Economic Cooperation Development among

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others. It has signed trade agreements with United States, China, and Canada. Also, it has joined

other agreements such as general Agreement on Tariffs and trade (GATT), North American free

Trade Agreement (NAFTA) and Latin American Integration Agreement (ALADI)

Foreign Direct Investments

Although the country has a current poor account status, its foreign direct investment has

increased tremendously in the last quarter of 2016. It recorded an increase of 5.7 billion dollars

in the last quarter of 2016 (OECD Economic Surveys, page 16). The main countries investing in

Mexico are United States, Spain, Netherlands, and Belgium. The manufacturing industry

financial service industry, transport, and mining industries are among the sectors attracting

foreign investors. These investments contribute 36.7% of the country’s GDP.

Industries of the Future

Mexico is a very rich country in terms of resources. It has several energy sources that can be

exploited to provide the country income. According to statistics, these sources can provide

enough energy for the country and some left for export. The country produces a total of 245

billion kilowatts worth of electricity and consumes 238 billion kilowatts (Gómez, Rodrigo, and

Argelia, page 174). This means that it can export up to 7 billion kilowatts of electricity. The

country also produces oil and natural gas. Its daily oil production reaches up to 2622 thousand

bbl. per day. The country only uses 2000 remaining with a whopping 622 thousand for export. Its

gross oil production is 567 billion cut, with a consumption of 2570 and exports of .8 billion

(Gómez, Rodrigo, and Argelia, page 174). Despite the high production of energy, the country

still imports some to supplement its sources. Other than energy sources, the country also

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produces motor vehicle parts, furniture, industrial machinery, vegetables, plastics and precision

instruments which form bulk of their exports.

Conclusion

Generally, Mexico has a great economy compared to most countries of the world. The country

has several industries that play an important role towards contributing to its Gross Domestic

Product. The main challenge facing the country is the issue of drug traffickers. The government

needs to handle this issue with more seriousness and avoid any sort of corruption. Making the

country a drug-free nation will encourage a positive environment for investors. Other than the

economic construction which took place in 2016, the country is doing very well economically. It

is stable enough to provide jobs to most of its population.

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Works Cited

Cypher, James M., and Wise Ral Delgado. Mexico's economic dilemma: the developmental

failure of neoliberalism. Illustrated ed., Rowman et Littlefild Publishers, 2011.

Callcott, Wilfrid Hardy. Western hemisphere: its influence on united states policies to the end of

world war ii. Univ Of Texas Press, 2014.

Edmonds-Poli, Emily, and David A. Shirk. Contemporary Mexican politics. Second ed.,

Rowman & Littlefield Publishers, 2012.

Gómez, Rodrigo, and Argelia Muñoz Larroa. “Cultural Industries and Policy In Mexico and

Canada After 20 Years of NAFTA.” Norteamérica, vol. 9, no. 2, 2014, pp. 173–204.,

doi:10.20999/nam.2014.b007,

http://www.sciencedirect.com/science/article/pii/S1870355016300076

OECD Economic Surveys: Mexico 2013. 1st ed., OECD, 2013.

Rumney, Thomas A. The geography of Central America and Mexico: a scholarly guide and

bibliography. Scarecrow Press, Inc., 2013.

Zea, Leopoldo. Positivism in mexico. Illustrated ed., Univ Of Texas Press, 2015.

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