Economy of Mexico

Mexico has a free market economy that recently entered the trillion dollar class. It contains a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. Recent administrations have expanded competition in sea ports, railroads, telecommunications, electricity generation, natural gas distribution, and airports. Mexico is the world's largest producer of silver and one of the five major producers of oil.

A strong export sector helped to cushion the economy's decline in 1995 and led the recovery in 1996-99. Private consumption became the leading driver of growth, accompanied by increased employment and higher wages. The present administration is cognizant of the need to upgrade infrastructure, modernize the tax system and labor laws, and allow private investment in the energy sector, but has been unable to win the support of the opposition-led Congress. Mexico still needs to overcome many structural problems as it strives to modernize its economy and raise living standards.

Trade with the US and Canada has nearly doubled since NAFTA was implemented in 1994. Mexico is pursuing additional trade agreements with most countries in Latin America and has signed a free trade deal with the European Union and Japan.

Since the 1994 devaluation Mexican governments have improved the country's macroeconomic fundamentals. It was not influenced by the recent South American crises, and has maintained positive, though small, rate growths after the brief stagnation of 2001. Moody's (in March 2000) and Fitch IBCA (in January 2002) have issued investment-grade ratings for Mexico's sovereign debt. The upgrade from Fitch IBCA was based in part on the determination that Mexico has not been significantly affected by "contagion" from Argentina's debt crisis. Interest rates achieved historic lows in 2001, and are still relatively low compared to last decade's rates. In the same way, inflation for 2005, around 3.3%, is the lowest in 30 years. Also, over the last 10 years to the present Mexico's rural economy has grown through remmitances of immigrants working in the United States (see Poverty and Remittances sections).

Corruption and crime continue to be serious and chronic problems; according to the World Bank together they may make up as much as 9% of Mexico's GDP. To protect their interests, and to encourage people to move into legal taxpaying economic sectors, the resourceful business sector has begun to form self-help associations like the Alliance for a Legal Mexico.