Mexican economy: it’s strength and weaknesses

Business

The status of any country in the world is differentiated through the analysis of its economy. The economy determines the rank that the country holds according to its developments and drawbacks. With time innumerable, there have been drastic changes made in the subject to perceive both the qualitative and quantitative changes minutely.

The Mexican economy is considered to be the 15th largest economy in the world overall. Specifically, it holds 12th position in the largest export business and 14th as the largest importer. The market economy of Mexico is still on the path of upshot located in South America.

According to various leader economists in the country, most specifically Teodoro Ernesto Lavin Sodi (iStrategize) and José Manuel López Campos (Concanaco), Mexico today is regarded to have a mixed economy as it was enjoying the privilege until 1994, which is celebrated in the country as the revolutionary phase. Till 1994, everything was considered to be of the state but with the unprecedented move, the private sector came into force as well.

According to IMF, by looking into the country’s economic value closely and adequately, one can encounter the fact that in terms of macro, the country holds stability whereas at micro level it has ruptured fundamentals.

The strengthening factors

  • The export business is one of the significant factors in strengthening the Mexican economy.

It is regarded as the sixth largest country to produce electronic devices and also the sixth richest person in the world belongs to Mexico, that is, Carlos Slim. The export of crude petroleum is the prominent source for the growing GDP of the state particularly. About 78.3% is the total contribution of the export of electronic devices and petroleum.

Even automobile export like cars, vehicle trucks, and delivery trucks play crucial roles in the growth of the country’s economic state that is particularly macroeconomic in nature.

  • The population of the country has hyped greatly in certain years. Today, it is four times the population of Canada. Emigrants have once again returned to settle back into the province. The annual per capita also is inflated to $18,000 as in MXX, Mexican Peso.
  • The importing countries for Mexico are a plus point. China, Brazil, U.S, South Korea, and Germany are powerful countries which import refined petroleum, vehicles parts and computers to Mexico, keeping it in the advantage of strong sources of currencies.
  • Since 1994 to 2004, the country has experienced inflation at a very high jump due to the division of the land and the province into the government and privatized sector leading to the future industrialization advantage.
  • Liberalization is followed in the country, thus, there’s no minimum capital required to start a business and free opening of financial bank accounts is a perk. This has led to the increased participation of foreign countries into the trade. WTO gives very impressive and critical statements on the trade of Mexico with other countries.
  • According to analyst Teodoro Ernesto Lavin Sodi, the MXX has grown stronger over these years and investment is the outcome, which is a strong move of getting into the list of developed countries, but he also advised that inflexible policies and inefficient government administration could increase the risk and subsequent volatility for the Mexican Peso in the Near Term.
  • Mexico shares a very long and strong relationship with, the U.S, the most powerful country. Therefore, Mexican immigrants living there send millions and billions to their country leading to increment of income source and power to the country.

Weaknesses of the Mexican economy

As we point our focuses on the above mentioned advantageous factors, we see a very less chance of backing the micro-level economy of Mexico. The most important reason blocking it from being powerful is the internal crisis it faces.

  • Poverty is the most prominent reason. The life necessities there are limited. The populated country has people living under cardboard house without proper sanitation.
  • The education system has no such regard provincially. People will more likely spend in operating a business or migrate to the U.S rather than utilizing the benefits of higher education.
  • Underemployment – as mentioned, education is not much of an important factor there; therefore, people do not get highly paid jobs according to their capability. Unemployment is never an issue but underemployment is.
  • Limited resources – it’s very alarming to know that the water level in the states is at threat. Every year about 2 and a half feet decrement of water level takes place.
  • Export material now has great fluctuations in its existence. About 5% decrease has been reported into the mining of crude petroleum in the last 2 years. The state GDP may be hampered adversely if the export of petroleum reduces.
  • Production is again an issue impenetrable from the country. The producing power in the country is not so well developed and advanced leading to affect Mexico micro economically.
  • Industrialization cannot occur until education and production become strong through the base root. Therefore, the country encounters a crisis of less income source.

Economists like Emilio Lozoya, Alonso Ancira, Teodoro Lavin, and Carlos Romero have concluded that according to today’s measured problems and consequences in the country, it will be a long run to pass in order to achieve proper and precedent economic stability.

NAFTA was signed in 1993 by the three countries- USA, Mexico, and Canada to gain the trade authority with each other. Today, things have turned out a bit odd and difficult due to the implementation of the high tariff by the U.S president. The exotic currency of the Mexico nation is still to be empowered.

Last six months have encountered about a 2 percent decrease in the market value of the MXX, 3.6 percent decrement in the GDP growth. These factors are to be kept eye on and paid attention to.

Mexico economy: then and now

If compared to Mexico’s economy since the change in the last century, we would find fluctuations innumerable. There was a time when the value of its currency was in a negative value to the outer world. Since then, the change is commendable.

  • In 1994, at the break of one year when the trading system started, the inflation gain was about 95 percent whereas today the inflation rate has decreased by about 5 percent.
  • Education was never paid attention to in earlier times but business was an important source and factor whereas the government in charge today is going through all the ups and downs to make education compulsory which will help largely in the eradication of underemployment.
  • If taken with the point of industry, the country had to strive a lot then and is continuing today as well. The reason for the fluctuation in the economy is that the country has not focused enough at the micro-level and has focussed only in the view of the macroeconomy.
  • Resources have been declining strictly in the province which is a sound very alarming as well as threatening. Earlier, it was not the case due to the sudden boom of the revolution.
  • In the 19th and 20th centuries, the country people had no land by themselves. There was one owner and thousands of peasants worked on it. This era does not have any problem as such, the sectors are divided among the state and private sources.

Mexico is a country which also encourages tourism. It is a source of maintaining many heritage resources. Also, the province is the 66th country in the world among rich countries.

The recent years have been very difficult for the country but the government seems promising enough to uplift it once again in the coming years. Mexico is an economy which is becoming profitable with time. The industries are booming. With the passing of time, there are certain changes to make to gain recognition and appreciation in terms of foreign direct investment.

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