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Mexico - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Mexico City, Federal District (DF)
Area:: 1.964 km2
Total Population:: 120.847
Annual growth rate:: 1.00%
Density:: 62.00/km2
Urban population:: 78%
Population of Mexico City (21.163), Monterrey (3.650), Guadalajara (3.600), Puebla (2.500), Ciudad Juarez (2.010), Ecatepec (1.690), Toluca (1.650), Leon (1.635), Tijuana (1.500)
Official language: Spanish
Other languages spoken: Many Mexicans also speak English. In some rural areas, native dialects are spoken.
Business language: Spanish and English
Ethnic Origins:: 60% mixed ethnic origins (Amerindian - Spanish), 30% Amerindian, 9% white people and others 1%.
Beliefs: Catholics: 89.9%, Protestants: 5.2%, Jewish: 0.05%, Others 2.1%, No religion 2.5%,
Telephone codes:
To make a call from: 0
To make a call to: +52
Internet suffix:: .mx
Type of State::
Mexico's official name is Mexican United States. It is a federal republic based on presidential democracy.
Type of economy::
Economy oriented toward exports; member of OECD; emerging financial market.
Highest per capita income in Latin America; the most open country in Latin America, heavily dependent on the American economic situation

Economic overview

Mexico is the 14th largest economy in the world and second largest economy in Latin America. Because of the economy's vulnerability to external shocks, especially to the state of the U.S. economy, the Mexican growth slowed down in 2012 (3.3%) and again in 2013 (1.2%), contrary to all predictions. According to the authorities, the crisis should only be temporary and growth should reach around 3-4% in 2014.

The year 2013 was the most difficult for the Mexican economy since 2009. Due to the weak recovery of the US economy, the Mexican trading deficit deepened sharply and remittances from Mexicans living in the US dropped by 5%, despite being the country's second largest source of foreign currency. The reduction in public spending has also been an impediment to growth. The country also suffered damaged caused by two large hurricanes. Teh country has a number of advantages: foreign investment has been booming, its public finances are healthy, state debt is contained, infaltion is stable and the banking system is solid. The discovery of new gas fields has opened new possibilities for the country and a hope to turn away from nuclear energy. The 2014 budget  The banking system is sound, and through a policy of budgetary and fiscal restraint, public debt has been contained at less than 40% of GDP and economic stability has been maintained. The discovery of gas fields in the country opens up and makes possible the withdrawal from nuclear energy. The 2014 budget is expansionist and plans on having the highest budget deficit (1.5% of the GDP) since the 2009 recession. It gives priority to infrastructures, education adn public safety and aims to encourage growth, job creation and improve the social situation. A tax increase is planned to finance unemployment insurance and pensions; the state monopoly on oil should be abandoned. A new strategy to fight against organised crime has also been adopted, since violence is hampering development.

Less than 5% unemployment is foreseen for 2014, but the informal sector is very large. Inequalities have increased, in terms of income but also in terms of exposure to natural disasters. More than 46.% of residents are poor. Insecurity related to crimes committed by drug cartels is a major problem.

Main industries

Agriculture accounts for approximately 4% of the GDP and employs 13% of the active population, however, the scarcity of credit continues to penalize this sector. Mexico ranks amongst the world's largest producers of coffee, sugar, corn, oranges, avocadoes and limes. It is also the world's 5th biggest producer of beer and its number two exporter. It is amongst the world's leading producers of many minerals, including silver, fluorite, zinc and mercury, and its oil and gas reserves are one of its most precious possessions: Mexico is the world’s fifth largest producer of oil. The oil company PEMEX is the second most powerful company in Latin America, according to the industry journal América Economía. Cattle farming and fishing are also important economic activities.

The aerospace sector has grown sharply in the last five years, due to the presences of almost 190 companies, such as Bombardier, Goodrich, the Safran group and Honeywell, which together employ 30 000 people. Mexico is also one of the 10th major car producers. The hi-tech, information and software development sectors are also experiencing a real momentum, driven by the quality of the workforce, clusters and low operating costs, which allow for the establishment of call centers.

The tertiary sector contributes to around 60% of the GDP and the construction sector has been coming up since 2010 due to significant real estate investments.

Foreign trade overview

Mexico is one of the countries that most depends on foreign trade. Foreign trade represents around 64% of its GDP (WTO 2010-2012). Mexico has signed 12 free-trade agreements with about forty different countries of the world. It has been a member of NAFTA - the free-trade agreement that unifies the United States, Mexico and Canada, since 1994. The country signed a free trade agreement with the European Union in 2000 and a commercial agreement with Japan came into force in April 2005.

The United States buys 80% of Mexico's exports. Its main export partners are the NAFTA and the European Union. The main export goods are electrical and electronic equipment, vehicles, mineral fuels, oil and machinery. Its three main import partners are the NAFTA, China and Japan. It mainly imports electrical and electronics equipment, machinery, vehicles and plastic products.

After reaching its frist trade surplus since fifteen years in 2012, Mexico registered a 1 billion USD trade deficit in 2013, due to weak economic growth and the slow recovery of the US economy.

FDI

Mexico is one of the emerging countries most open to foreign direct investment. According to the 2013 World Investment Report published by UNCTAD, Mexico is the third largest FDI recipient in Latin-America and the Caribbean, after Brazil, the British Virgin Islands, Chile and Colombia. In 2013, FDI flux into the country reached their record level of 35.2b USD, which equals almost the double of their levels in 2012. This is mainly due to the aquisition by a Belgian brewery Anheuser-Busch inBev of the Mexican bear giant Grupo Modelo for the sum of 13 billion USD.

However, in recent years, Mexico's competitiveness has been hampered by the growth of organized crime and the lack of reforms in the energy sector, professional services and taxation. Corruption and administrative inefficiency are also major problems.

The areas where foreign investments are concentrated the most are the border towns with the United States (where assembly factories are located), as well as the capital. The Yucatan peninsula continues to receive foreign investments thanks to its tourism appeal. These investments come especially from the United States and Spain (mainly from the banking sector). The sectors receiving significant foreign investments are finance, automobile industry and electronics and energy sectors. The U.S. and Japan are the two largest investors.
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