The Mexican economy has a GDP growth rate of 2.6% and faces challenges such as reliance on the U.S. for exports and a high level of income inequality, with a Gini coefficient of 0.48. Key strengths include low labor costs, a competitive currency, and numerous free trade agreements, while weaknesses encompass violence, corruption, and a large informal sector. The country is also experiencing a growing middle class that is attractive for foreign direct investment, particularly in services.

1. Profile of the Mexican Economy
Key Macro Data
Latest annual GDP
Growth (%)
2.6%
GDP or GNI per capita
(US $, PPP)
$18k
Inflation (%) 2.7%
Unemployment rate
(% of labour force)
4.2%
Fiscal balance
(% of GDP)
-3.5%
Govt debt (% of GDP) 48%
Yield on 10-Yr Govt
Bonds (Per Cent)
5%
Investment (% of GDP) 22%
Gross national savings
(% of GDP)
20%
Background Information
Currency unit Peso
Exchange rate system Floating
Policy interest rate 3.75%
Member of a Regional
Trade Agreement
NAFTA
Pacific
Alliance
Current account
balance (% of GDP)
-2.0%
Main corporate tax
rate (Per Cent)
30%
Competitiveness rank 57/144
Corruption Perception
Ranking
103/17
5
Ease of Doing Business
Ranking
38/189
External Debt
(% of GDP)
32%
Aspects of Development
Latest HDI ranking 74/187
Income inequality HDI
ranking
67/187
Gender inequality HDI
ranking
74/187
% of population living
in extreme poverty
< 1%
Life Expectancy at
birth (years)
76.8
Gini coefficient (Latest
published estimate)
0.48
(High)
Inward FDI (% of GDP) 3%
Remittances (% of
GDP)
4%
Aid (% of GDP) Zero

2. Contextual Background on Mexican Economy
Economic Structure
Share of GDP by value added (% of GDP)
Primary: 4%
Industrial: 34%
Services: 62%
Main export industries (+ major firms)
1/ Motor vehicles and parts
2/ Oil
3/ Audio and computer equipment
Key risks to sustainable growth
1/ Reliance on US – 75% of exports go to USA
2/ Large informal sector with low productivity
3/ Low investment and saving as % of GDP
Development and Growth Issues / Policies
3 factors limiting development progress
1/ Narrow tax base - <60% registered for tax
2/ Widespread corruption and violence
3/ High inequality, lack of inclusive growth
3 policies used to improve the supply-side
1/ Reforms to energy, telecoms, finance
2/ Infrastructure investment
3/ Stronger anti-corruption policies
Long term challenges facing this country
Challenge 1: Avoiding middle-income trap
Challenge 2: Improving governance
Challenge 3: Cut size of informal economy

3. Main Strengths and Weaknesses for Mexico
Economic / Competitive Strengths
1/ Low unit labour costs – attractive to FDI
2/ Large / growing population (market size)
3/ Competitive currency helping exports
4/ Many free trade agreements completed
5/ Low unemployment and government debt
Other Notes
• Mexico is developing a strong revealed
comparative advantage in manufacturing
• Unemployment is low but there is
significant under-employment in a dual
economy
• Fast growing middle class is attractive to
FDI especially from service businesses
• More than 90% of Mexican overseas trade
now covered by free trade agreements
Main Weaknesses in their Economy
1/ Concerns over violence and corruption
2/ Heavily dependent on oil revenues
3/ Informal labour market – dual economy
4/ High levels of income/wealth inequality
5/ Long tail of low productivity businesses
Other Useful Contextual Knowledge
• Mexico has over 4 million micro
businesses that employ the majority of
Mexicans – few have access to equity /
loan finance
• Key industries have been dominated by
monopolies such as Mexico Telecom and
Pemex (Oil). The lack of contestability
keeps prices and high and limits capital
investment and innovation