Mexico Capital Formation

Mexico has a long history of economic stagnation and political instability.  Wars and the Great Depression took a toll on the country’s national income.  In the 1930s, all sectors of the economy began a slow recovery facilitated by structural reforms. 

Economic Growth:

Mexico’s development strategies helped the economy grow modestly and Industrial output reached 29% in 1970.  Later in the decade, economic activity dipped.  Fiscal mismanagement along with the oil shock in 1973 set the economy back and also the balance of payments.  During this period, the peso also saw its value drop by 45%.  The 1980s were a vulnerable period for Mexico’s economy and it had a bad recession. 

Sectors of the Mexican Economy:

Mexico is a large country with vast resources and a long coastline.  Its natural resources include minerals like silver, gold copper, petroleum and timber.  Its agriculture sector is also prolific and they produce corn, wheat, cotton and fruit among other products.  Industry is active in producing chemicals, iron and steel, textiles and consumer durables.  Its service sector is the largest because of tourism.

Economic Reforms:

After President Vicente Fox was elected to office, he succeeded in pushing through fiscal, energy and pension reforms.  Organized crime poses a serious threat to the stability of the country and Congress has given vast powers to the Police Force to tackle this issue as this threatens the stability of the country. 

Mexico has been classified as a middle income country – and is working on alleviating poverty.  Inflation and public deficit are currently under control.  The country has a stable outlook.  Mexico received 21.3 billion dollars in 2010 in remittances from its migrant workers, living and working in the US.  Most of this is used for housing, food, health care and education.  Some of the money is used for infrastructure improvements in specific communities.

Foreign Direct Investment:

In 2010, Mexico saw 17.7 billion dollars in investments.  Other kinds of investments have been in the form of industry moving to Mexico from the US as labor costs were cheap. 
Mexico has invested a lot of money in the energy sector and was the 7th largest petroleum producer in 2010.  This is a big component of Mexican economy as the government still relies heavily on oil industry earnings.

The United States and Mexico have entered into several agreements over the years and some of them are:

  • Water:  Water has been an issue between the two countries and International Boundary and Water Commission helps to determine ownership of waters and other important issues.
  • Environmental Cooperation: this agreement was signed as part of NAFTA to improve conditions and also enforce environmental laws.
  • Telecom:  the United States and Mexico have signed 39 agreements just for the shared use of radio spectrum.  The two countries also transitioned to digital TV services in 2009 and some agreements also cover mobile broadband services.