I would like to share a translation of the latest article published by Enrique de la Madrid* in Mexico’s El Universal newspaper. It explains why the lack of growth in productivity has also hampered the economic growth rates in Mexico during the last three decades. I hope you will find it interesting. As always, let us know if we can support your business operations in Mexico or Latin America. * Enrique de la Madrid is the General Director of Bancomext, Mexico's National Export Development Bank.

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Productivity, the key to Mexico’s growth
By Enrique de la Madrid
Mexico is blessed with a wealth of strengths and comparative advantages, placing it among the
countries with the highest potential for growth in the twenty-first century. Foremost among
these strengths are the country’s macroeconomic stability, its unique geographical location and
the network of free trade agreements which give it access to the world’s principal markets.
Thanks to the above, the country’s external sector is dynamic and highly value-added, involving
productive, sophisticated industries such as automotive and aerospace. However, on a national
level, productivity has remained stagnant in recent years.
The main determining factor behind a country’s growth is its productivity – or the efficiency
with which the factors of production are used. When productivity is higher, more goods and
services are produced with the same factors of production.
In Mexico, the total productivity for factors of production between 1990 and 2014 recorded a
median decrease of 0.6% per year. This decline in productivity is also one of the main reasons
why Mexico’s economy has grown at a rate below its potential over the last three decades.
From 1980 to 2014, Mexican GDP grew at an annual average of 2.4%, almost half of that
observed in other emerging economies.
In response to low economic growth, resulting from poor productivity, the current
administration’s National Plan for Development establishes the strategy of democratizing
productivity. In other words, all businesses, rather than just a few, must have access to the
tools that will enable them to increase their productivity. For this reason, at the end of 2012 a
decree was issued to create the National Committee on Productivity, an advisory body to the
Federal Executive and the productive sectors. Increasing the scope of the formal economy is
one of its priority objectives, along with improving access to financing for productive activities,
increasing investment in human capital, strengthening the business environment and driving
balanced regional development.
In order to meet these objectives, the Committee has proposed three basic strategies: to take
advantage of opportunities for growth in high-productivity sectors arising from recent
structural reforms; to increase productivity in the sectors which employ the most people, but
which are not productive, and to promote the expansion of sectors which are highly productive
but which employ few people.

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According to INEGI, the sectors responsible for most of Mexico’s employment are also the least
productive, while the most productive sectors paying the best salaries employ only 12.6% of the
country’s labor force.
Nonetheless, we must acknowledge that in recent years, labor force productivity, one of the
factors comprising total productivity, has significantly improved. Between 2005 and 2014, labor
productivity per person employed grew 5.1%, implying a growth of 0.5% per year, which is
slow, but nonetheless positive.
Finally, one of the fastest ways to increase Mexico’s productivity through the creation of quality
jobs is by taking advantage of the presence of large global corporations in Mexico, which are
involved in the country’s most productive sectors. What we need is to put national capital and
human resources into supplying these businesses.
The more Mexican businesses incorporate themselves successfully into the supply chain of
these large businesses, the domestic content of our exports will increase, productivity will
improve and Mexico’s economic growth will skyrocket.
@edelamadrid
The author is the General Director of Mexico’s Export Bank (Bancomext)
This article was originally published in El Universal Newspaper. (www.eluniversal.com.mx)
Translation provided by Nuricumbo + Partners
Nuricumbo + Partners is a consulting firm based in Mexico City. We are specialists in Mexico and Latin America.
Our lines of business includes:
 Covering interim finance positions at the CFO/Controller level
 Performing special audit projects in Latin America (due diligence, internal controls, fraud prevention)
 Business development and business representation in Mexico