Mexico has a free market economy with a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. The number of state-owned enterprises in Mexico has fallen from more than 1,000 in 1982 to fewer than 200 in 1999. The administration of President Ernesto Zedillo[?] continued a policy of privatizing and expanding competition in sea ports, railroads, telecommunications, electricity, natural gas distribution, and airports which was initiatied by his predecessors Miguel de la Madrid[?] and Carlos Salinas de Gortari.
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. Mexico still needs to overcome many structural problems as it strives to modernize its economy and raise living standards. Income distribution is very unequal, with the top 20% of income earners accounting for 55% of income. 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 EU to lessen its dependence on the US. The government is pursuing conservative economic policies in 2000 to avoid another end-of-term economic crisis, but it still projects an economic growth rate of 4.5% because of the strong US economy and high oil prices.
Mexico is highly dependent on exports to the U.S., which account for almost a quarter of the country's GDP. The result is that the Mexican economy is strongly linked to the U.S. business cycle. With the downturn in the U.S. economy in 2001, there was little or no growth in Mexico in 2001. Depending on the strength of the recovery in the U.S. in 2002, growth in Mexico in 2002 will probably be between 1%-1.5%.
Mexican trade policy is among the most open in the world, with Free Trade Agreements[?] with the United States, Canada, the EU, and many other countries. Since the 1994 devaluation Mexican governments have improved the country's macroeconomic fundamentals. 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.
Mexico is an active and constructive participant in World Trade Organization (WTO) matters, including in the launching of the Doha trade round. The Mexican Government and many businesses support a Free Trade Area of the Americas.
Given the overall size of trade between Mexico and the United States, there are remarkably few trade disputes, involving relatively small dollar amounts. These disputes are generally settled in WTO or NAFTA panels or through negotiations between the two countries. The most significant areas of friction involve trucking, sugar, high fructose corn syrup, and a number of other agricultural products.
There have been programs that provide money to pay off loans and help banks with their debt burdens. While high credit costs are still a major problem impeding agricultural development, the burden of debt has been reduced. High interest rates for loans have compounded the difficulty for producers, and the 1994 peso crisis exacerbated the decline in productivity. Agriculture accounted for 5.8% of GDP in 1999.
In an effort to raise rural productivity and living standards, Article 27 of the Mexican Constitution was amended in 1992 to allow for the transfer of communal land to the farmers cultivating it. They then could rent or sell it, opening the way for larger farms and economies of scale. By early 1996, however, only six farmers' cooperatives had voted to dissolve themselves, perhaps because the government provides subsidies for communal land seeded by farmers. (The subsidy was 708 pesos per hectare in 1999-2000 and 829 pesos per hectare in 2000-01.) Since communal land use is formally reviewed only every 2 years, privatization of these communal lands may continue to be very slow.
In the past, the government encouraged production of basic crops such as corn and beans by maintaining support prices. In order to stimulate its agricultural sector, Mexico is restructuring its support price scheme. The government in 1996 crafted federal-to-state agreements targeted at each states' most urgent needs, with the goal of increasing the use of modern equipment and technology in order to increase per-acre productivity. In addition to this new initiative, the government is continuing PROCAMPO, the rural support program which provides the approximately 3.5 million farmers who produce basic commodities--about 64% of all farmers--with a fixed payment per hectare of cropland.
Foreign Direct Investment[?] (FDI) presents a bright picture in the Mexican economy. In 2000, Mexico was the largest recipient of FDI ($22.5 billion) in Latin America. Net U.S. FDI in Mexico in 2000 was $3.2 billion, and the 2000 U.S. stock of FDI in Mexico was $34.5 billion (U.S. BEA numbers). U.S. FDI is concentrated in the manufacturing (mostly maquiladora or in-bond plants) and financial sectors. Final numbers for 2001 have not been published; the largest U.S. investment in 2001 was Citigroup's $12.2 billion acquisition of Banamex. This investment was the main reason Mexico received more FDI than Brazil in 2001.
Mexico's state-owned oil company, Pemex[?], holds a constitutionally established monopoly for the exploration, production, transportation, and marketing of the nation's oil. Since 1995, private investment in natural gas transportation, distribution, and storage has been permitted, but Pemex remains in sole control of natural gas exploration and production.
Electricity - production: 194.367 billion kWh (2000)
Electricity - production by source:
fossil fuel: 75.91%
other: 3.19% (2000)
Electricity - consumption: 182.829 billion kWh (2000)
Electricity - exports: 77 million kWh (2000)
Electricity - imports: 2.145 billion kWh (2000)
Agriculture - products: corn, wheat, soybeans, rice, beans, cotton, coffee, fruit, tomatoes; beef, poultry, dairy products; wood products
Exports: $159 billion (f.o.b., 2001)
Exports - commodities: manufactured goods, oil and oil products, silver, fruits, vegetables, coffee, cotton
Exports - partners: US 88.4%, Canada 2%, Germany 0.9%, Spain 0.8%, Netherlands Antilles 0.6%, Japan 0.4%, UK 0.4%, Venezuela 0.4%, (2001 est.)
Economic aid - recipient: $1.166 billion (1995)
Currency: 1 Mexican peso (Mex$) = 100 centavos
Exchange rates: Mexican pesos (Mex$) per US$1 - 9.1614 (January 2002), 9.3423 (2001), 9.4556 (2000), 9.5604 (1999), 9.1360 (1998), 7.9185 (1997)
Fiscal year: calendar year