MEXICO MacroEconomics
PRESENTED BY:
Abhinav Arya
Abhinav.arya@newgen.co.in

INTRODUCTION

BACKGROUND
Capital: Mexico City
Area: 1,972,550 sq km
Languages: Spanish, various Mayan,
Nahuatl and other regional
indigenous languages
Currency: Mexican peso

POLITICAL ENVIRONMENT
Federal republic consisting of 31 states and a Federal
District
Regular elections, tolerance of opposition parties, and
political campaigning
State and local governments rely heavily on the federal
government for revenues
States has own constitution modeled on the national
charter and has the right to legislate and levy taxes
other than interstate customs duties.

SOCIAL ENVIRONMENT
Approximately 24 million Mexicans live in extreme
poverty (after the 1994–1995 economic crisis)
1994–
A rapid growth in exports propitiated by NAFTA and
other trade agreements resulted in the reduction of the
poverty rate
According to the World Bank, extreme poverty was
reduced to 17.6% in 2004

STRENGTHS
Most extensive road networks in Latin America
Country has a rich biodiversity and varied wildlife
Mexico is fourth largest corn producer in the world
Main industries : Aircraft, automobile industry, petrochemicals,
cement and construction, textiles, food and beverages, mining,
consumer durables, tourism
Industrial growth rate : 3.6% (2006)
GDP of sector : 25.7% of total GDP
Mexico is the fifth-largest oil producer in the world
fifth-
The service sector was estimated to account for 70.5% of the
country's GDP

STRENGTHS
Tourism is one of the most important industries in
Mexico. Mexico is the eight most visited country in the
world (with over 20 million tourist a year)
Mexico has a single securities market, the Mexican
Stock Exchange. It is Latin America's second largest
exchange, after Brazil's
Remittances are a substantial and growing part of the
Mexican economy; they comprised $18 billion in 2005
Agriculture accounted for only 4 percent of gross
domestic product

STRENGTHS
Abundant mineral resources and has
historically led the world in the production of
silver
Mexico has entered into regional and bilateral
FTAs involving more than 40 countries
Most important trade agreement being NAFTA
Relatively young population

WEAKNESSES
Widespread poverty
Poor physical infrastructures (including
telecommunications, energy and water)
Restrictive regulations and insufficient competition in
some sectors are hindering productivity growth
Large firms are likely to find a way around costly
administrative burdens and manage to overcome
infrastructure lags
Many smaller firms face severe constraints to investment
and expansion

GOVERNMENT POLICIES
AND THE CENTRAL BANK
Banco de México is
Mexico's central bank
It's main objective is
to achieve stability in
the purchasing power
of the national
currency. It is also the
lender of last resort.

GOVERNMENT POLICIES
AND THE CENTRAL BANK

External Debt
At 21 percent of
gross domestic
product (GDP),
Mexico’s external
debt-to-
debt-to-GDP ratio is
one of the lowest in
Latin America
Debt-
Debt-service ratio
(the ratio of debt
service to export
earnings) has
declined from 25.5
percent in 2001 to
an estimated 15.8
percent in 2005.

Floating exchange-rate regime
exchange-
Exchange rate of Pesos with comparison to US $

GOVERNMENT POLICIES
AND THE CENTRAL BANK
According to the central bank, international
reserves stood at US $75.8 billion in 2007
Banco de México has as its primary objective
maintaining stability in the purchasing power of
the peso. It sets an inflation target
The central bank also monitors the evolution of
several economic indicators

Trade
World Trade Center in
Mexico City
Mexico is an export
oriented economy
NAFTA
North American Free
Trade Agreement

Trade

Trade

MACROECONOMIC ANALYSIS
The economy of Mexico was the 14th largest in
the world in 2006
Balance of payments of Mexico in million US $

INFLATION

GDP
GDP in 2006 : $ 1.134 trillion

Percentage change in consumption,
investment & GDP with reference to
previous year

COMPARISON

COMPARISON

COMPARISON

COMPARISON

ANALYSIS AND SUGGESTIONS
Further international trade and investment
liberalization together with regulatory reforms
are required
Better regulation to boost productivity and
growth
Labour market and social policies have an
important role to play

Unemployment Rate

ANALYSIS AND SUGGESTIONS
The efforts should be devoted to the strengthening of local
industries
Much of the FDI in Mexico is attracted by the country’s strategic
location within the North American Free Trade Agreement, which
has positioned it as a springboard to the US and Canada
Other attractions are competitive production costs and a young,
skilled workforce, together with political stability and an open
economy
The opportunities for investors are numerous, particularly in sectors
such as automotive, electronics, information and communication
technology, agribusiness, chemicals and pharmaceuticals,
biotechnology, financial services, water and power generation

ANY
QUERIES
OR
FEEDBACK?