Macroeconomics Mexico


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Macroeconomics study of Mexico .
benficial for MBA and PGDM students.
Good casestudy with Free trade aggreements details

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Macroeconomics Mexico

  1. 1. MEXICO MacroEconomics PRESENTED BY: Abhinav Arya
  3. 3. BACKGROUND Capital: Mexico City Area: 1,972,550 sq km Languages: Spanish, various Mayan, Nahuatl and other regional indigenous languages Currency: Mexican peso
  4. 4. 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.
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. 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.
  12. 12. 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.
  13. 13. Floating exchange-rate regime exchange- Exchange rate of Pesos with comparison to US $
  14. 14. 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
  15. 15. Trade World Trade Center in Mexico City Mexico is an export oriented economy NAFTA North American Free Trade Agreement
  16. 16. Trade
  17. 17. Trade
  18. 18. MACROECONOMIC ANALYSIS The economy of Mexico was the 14th largest in the world in 2006 Balance of payments of Mexico in million US $
  19. 19. INFLATION
  20. 20. GDP GDP in 2006 : $ 1.134 trillion
  21. 21. Percentage change in consumption, investment & GDP with reference to previous year
  22. 22. COMPARISON
  23. 23. COMPARISON
  24. 24. COMPARISON
  25. 25. COMPARISON
  26. 26. 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
  27. 27. Unemployment Rate
  28. 28. 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