Economy of Mexico

Mexico possesses a developing mixed economy that ranks as the 13th largest globally.

This ranking is based on both nominal Gross Domestic Product (GDP) and purchasing power parity. GDP represents the total value of all goods and services produced within a country. Since the economic crisis of 1994, Mexican administrations have focused on improving macroeconomic fundamentals. These fundamentals include maintaining stability in inflation and interest rates. While the country has achieved record lows in these areas, significant economic challenges remain. These challenges include high poverty rates and deep regional inequalities.

The Mexican economy functions through a combination of modern industrial and service sectors.

There has been an increasing trend toward private ownership in these sectors. The government has also worked to expand competition in vital infrastructure. This includes sectors like telecommunications, electricity generation, and natural gas distribution. Competition is also being increased in ports, railroads, and airports to upgrade the nation's systems.

As an export-oriented economy, Mexico relies heavily on international trade. More than 90% of Mexican trade is conducted under free trade agreements (FTAs). These agreements exist with over 40 different countries, such as Japan and the European Union.

Trade agreements serve as a primary mechanism for Mexico's economic growth.

The most influential agreement is the United States–Mexico–Canada Agreement, known as the USMCA. This agreement was signed in 2018 and officially went into effect in 2020. Before this, the North American Free Trade Agreement (NAFTA) had already shaped the economy. In 2006, trade with Mexico's two northern partners was massive. It accounted for almost 90% of all Mexican exports. It also represented 55% of all Mexican imports. This close connection to North America defines much of the country's commercial activity.

Mexico's economic history is marked by periods of rapid growth and intense conflict.

During the late nineteenth century, the presidency of Porfirio Díaz brought substantial industrialization. This era saw the development of railroad networks and increased foreign investment. However, the distribution of land was extremely unequal during this time. By the end of his rule, 97% of arable land belonged to only 1% of the population. This inequality helped lead to the Mexican Revolution from 1910 to 1920. This armed conflict drastically changed the nation's political and economic structures.

Following the revolution, Mexico entered a period known as the "Mexican Miracle."

Between 1940 and 1970, the country adopted an import substitution industrialization (ISI) model. This model protected national industries to help them grow. During these three decades, the GDP increased sixfold even as the population doubled. The government also nationalized the oil and railroad companies during this era. However, the ISI model eventually faced limits as industries became less competitive. By the 1980s, the country began shifting toward neoliberal policies and trade liberalization.

The 1970s brought a period of both great opportunity and sudden crisis.

Under President José López Portillo, the discovery of vast oil fields changed everything. Mexico became the world's fourth-largest oil exporter during this time. The government borrowed money to invest in the state-owned oil company, Pemex.

Unfortunately, when international oil prices plunged in 1982, the economy crashed. This led to a period of high inflation and debt. In 1987, annual inflation reached a record high of 139.7%. This instability forced leaders to rethink how the country managed its finances.

Despite various crises, Mexico remains a significant player in the global market.

In 2023, thirteen Mexican companies were listed on the Forbes Global 2000. These are some of the largest companies in the world. However, the benefits of this wealth are not shared equally. The country is highly unequal, as 0.2% of the population owns 60% of the wealth. Meanwhile, 38.5 million people live in poverty as of 2024.

Additionally, while Mexican workers are ranked as the hardest-working in the world, their hourly pay remains low. The nation continues to work on modernizing its tax and labor systems.