|Mexico is highly dependent on exports to the U.S., which account for
almost a quarter of the country's GDP. The result is that the Mexican
economy is strongly linked to the U.S. business cycle. With the downturn
in the U.S. economy in 2001, there was little or no growth in Mexico in
2001. Depending on the strength of the recovery in the U.S. in 2002,
growth in Mexico in 2002 will probably be between 1%-1.5%.
Mexican trade policy is among the most open in the world, with Free Trade Agreements with the U.S., Canada, the EU, and many other countries. Since the 1994 devaluation Mexican governments have improved the country's macroeconomic fundamentals. Moody's (in March 2000) and Fitch IBCA (in January 2002) have issued investment-grade ratings for Mexico's sovereign debt. The upgrade from Fitch IBCA was based in part on the determination that Mexico has not been significantly affected by "contagion" from Argentina's debt crisis.
Mexico is an active and constructive participant in World Trade Organization (WTO) matters, including in the launching of the Doha trade round. The Mexican Government and many businesses support a Free Trade Area of the Americas.
Given the overall size of trade between Mexico and the United States, there are remarkably few trade disputes, involving relatively small dollar amounts. These disputes are generally settled in WTO or NAFTA panels or through negotiations between the two countries. The most significant areas of friction involve trucking, sugar, high fructose corn syrup, and a number of other agricultural products.
There have been programs that provide money to pay off loans and help banks with their debt burdens. While high credit costs are still a major problem impeding agricultural development, the burden of debt has been reduced. High interest rates for loans have compounded the difficulty for producers, and the 1994 peso crisis exacerbated the decline in productivity. Agriculture accounted for 5.8% of GDP in 1999.
In an effort to raise rural productivity and living standards, Article 27 of the Mexican Constitution was amended in 1992 to allow for the transfer of communal land to the farmers cultivating it. They then could rent or sell it, opening the way for larger farms and economies of scale. By early 1996, however, only six farmers' cooperatives had voted to dissolve themselves, perhaps because the government provides subsidies for communal land seeded by farmers. (The subsidy was 708 pesos per hectare in 1999-2000 and 829 pesos per hectare in 2000-01.) Since communal land use is formally reviewed only every 2 years, privatization of these communal lands may continue to be very slow.
In the past, the government encouraged production of basic crops such as corn and beans by maintaining support prices. In order to stimulate its agricultural sector, Mexico is restructuring its support price scheme. The government in 1996 crafted federal-to-state agreements targeted at each states' most urgent needs, with the goal of increasing the use of modern equipment and technology in order to increase per-acre productivity. In addition to this new initiative, the government is continuing PROCAMPO, the rural support program which provides the approximately 3.5 million farmers who produce basic commodities--about 64% of all farmers--with a fixed payment per hectare of cropland.
Manufacturing and Foreign Investment
Foreign Direct Investment (FDI) presents a bright picture in the Mexican economy. In 2000, Mexico was the largest recipient of FDI ($22.5 billion) in Latin America. Net U.S. FDI in Mexico in 2000 was $3.2 billion, and the 2000 U.S. stock of FDI in Mexico was $34.5 billion (U.S. BEA numbers). U.S. FDI is concentrated in the manufacturing (mostly maquiladora or in-bond plants) and financial sectors. Final numbers for 2001 have not been published; the largest U.S. investment in 2001 was Citigroup's $12.2 billion acquisition of Banamex. This investment was the main reason Mexico received more FDI than Brazil in 2001.
Oil and Gas
Mexico's state-owned oil company, Pemex, holds a constitutionally established monopoly for the exploration, production, transportation, and marketing of the nation's oil. Since 1995, private investment in natural gas transportation, distribution, and storage has been permitted, but Pemex remains in sole control of natural gas exploration and production.
Transportation and Communications
Tampico and Veracruz, on the Gulf of Mexico, are Mexico's two primary seaports. Recognizing that the low productivity of Mexico's 108 ports poses a threat to trade development, the government has steadily been privatizing port operations to improve their efficiency. A number of international airlines serve Mexico, with direct or connecting flights from most major cities in the United States, Canada, Europe, Japan, and Latin America. Most Mexican regional capitals and resorts have direct air services to Mexico City or the United States. Airport privatization, based on Mexico's successful experience with seaports, is nearly complete.
power parity - $915 billion (2000 est.)
SOURCES: The World Factbook, U.S. Department of State
Mother Earth Travel > Country Index > Mexico > Map Economy History