Mexico Economic Profile, Mexican Economy, Mexico's Economy, Economy of Mexico
While Mexico's economy is mature and generally fairly stable, there is a growing income gap between the rich and the poor. Political and social unrest will grow if this disparity is not addressed.
Mexico has one of the largest economies in the world, holding the twelfth position in the global list as measured by nominal gross domestic product (CIA World Factbook, 2007).
During 2004 its GDP exceeded the trillion-dollar mark, making Mexico one of the major middle-income countries with an advanced economy. Mexico is part of the North America Free Trade Agreement (NAFTA) with the US and Canada, and this had driven its export-led economy.
In Latin America, Mexico has the highest per-capita income level. In the international arena, the exchange rates of the Mexican Peso are high as well, and Mexico has the highest purchasing power parity of any country in Latin America.
Mexico also happens to be the only Latin American member of the Organization for Economic Cooperation and Development. In a recent study, Goldman Sachs predicted that Mexico will be a leader in the world economy by 2050, along with China, Japan, US, Brazil and India.
The Mexican economy underwent a tough phase in 1994. Since then, the country's administration has tried its best to bring about amendments in the country's macroeconomic situation. The economic crisis South America suffered in 2002 did not have a significant bearing on the Mexico's economy. Concerted efforts by the Mexican government have
ensured that interest rates, as well as levels of inflation, are extremely low, although Mexico, like all countries, is being affected by the run up in oil, food and commodity prices in 2008.
Despite its economic growth, studies by agencies such as Fitch IBCA and Moody's have revealed underlying problems in Mexico's economy. Great economic disparity exists between the various regions of the country, from the northern and southern parts of Mexico. Economic conditions in rural parts of Mexico lag far behind the urban areas, and gaps between rich and poor have widened in recent years. Levels of income inequality persisting in Mexico also need to be mitigated in order to achieve economic improvement in Mexico and reduce the risks of political and social instability.
Mexico also needs to improve its infrastructure, modernize its tax system, and amend its labor laws.
The industrial sector in Mexico is an unwieldy mix of technologically advanced businesses and antiquated industries in dire need of reform.
The agricultural sector is also an important part of the Mexican economy. The private sector has started assuming an increasingly important role in both the agricultural and the industrial sector. The government of Mexico has adopted measures that have led to additional levels of competition in certain sectors including airports, seaports, power generation & distribution, railroads, and telecommunications, with the hope of improving the country's infrastructure.