The Surprising Economy of Mexico, A Snapshot
You know that the beaches and the people of Mexico are very warm. What you may not know is that the economy of Mexico es muy caliente (sizzling hot). Consider:
- A strategic location
- Economic growth rate
- Advanced manufacturing
- Excellent supply chains
- Fiscal stimulus
- Talented, young workforce
With all of this going for it, the economy of Mexico has some surprising highlights. Data shows that this is the opinion of many. Luis Videgaray is an MIT graduate and Mexico’s Finance Minister. He’s the brains behind current economic reforms. He says the reforms may take years to kick in fully, but there are some surprising highlights.
First of all, Mexico is becoming a powerhouse of manufacturing. The country is on track to become the United States’ No. 1 source of imported cars. As a major auto manufacturer, 89 of the world’s top 100 auto parts makers have production in the country. In 2014, more than 10 billion dollars invested in this sector alone. Investors were Audi, Mercedes Benz, Kia, BMW, and Nissan. This year, Ford announced a 1.6 billion dollar investment in a plant to produce a rival hybrid to Toyota’s Prius.
The electronics industry of Mexico has grown at a fast pace within the last decade. Mexico has the sixth largest electronics industry in the world. There are almost half a million (451,000) students enrolled in electronics engineering programs. 114,000 electronics engineers enter the Mexican workforce each year
Mexico is flying high in the aerospace sector. Many multi-national companies are here because of:
- The talent and capabilities of the people
- Infrastructure development.
Today, there are 287 companies and R+D centres. The sector generates more that 45,000 high quality jobs. Mexico is the meeting point of the world’s two main aerospace manufacturing corridors, both in North America. Also, access to Asian and European markets make it the aerospace manufacturing center of the Americas. Exports amounted to over 6.3 billion dollars in 2014. That’s a 20% growth year over year for the past decade.
Finally, many more companies are making commitments of close to $10 billion in operations in Mexico. Mexico’s world exports in 2014 totalled $380.8 billion.
Meet the MINTs. Coined by British economist Jim O’Neill, the term refers to Mexico, Indonesia, Nigeria and Turkey. These countries share:
- The prediction of large surges of wealth
- Number of millionaires
- Rapid economic growth over the next decade.
David Rees from Capital Economics believes Mexico should swing from the worst performer in Latin America, to the best. Many think this may be contributing to a case of great reverse migration. Many Mexicans who left the country for better jobs are now returning home in droves. According to national stats, the middle class now makes up for 39% of the population.
According to Euromonitor International, 2014 saw dynamic growth in luxury goods in Mexico. Global luxury brands are moving in to the larger cities and opening their own stores. In the past 5 years, only the US, Canada and Brazil have purchased more private jets than Mexico.
Mexico has many established luxury hospitality brands on both coastlines and in interior cities. But the number of luxury rooms is far fewer than other countries worldwide. Not for long, In the past few years, top brands have entered the market and many others are expanding as well. Mexico boasts spectacular geography, warm people and a rich culture. Because of this analysts believe Mexico is on track for expansion in luxury tourism.
As a sector, tourism generated $16 billion in foreign exchange inflows in 2014. This was a 16.6 percent increase over 2013. Tourism generates 13% of Mexico’s gross domestic product.
The economic significance of tourism is best represented by how many people visit Mexico year over year. The arrival of international visitors by air to Mexico in the first three months of 2015 grew by 8.0 percent over 2014. Total number of visitors in 2014 was 29 million. That’s a 20.5% increase over 2013.
Bill Gates recently purchased the Four Seasons Punta Mita, Nayarit for 200 million. Michael Larson, chief investment officer said:
“We are a significant investor in Mexico and hold a long-term positive view on the country and its economy. This is an outstanding property asset.”
Standard & Poor’s recently boosted Mexico’s credit rating to an A3 from Baa. S&P trumpeted Mexico’s energy reforms as a “watershed moment” for the country. According to the International Monetary Fund, the Mexican banking system is strong. Private banks are profitable and well-capitalized. As a result, the financial and banking sector is seeing increased foreign company participation.
Few modern Mexican presidents can claim to have championed as many deep reforms and succeeded. Most notably, Peña Nieto has pushed many reform bills through Congress. Five of these required amendments to the constitution. Many of these began with work by predecessors. However, Forbes states he accomplished more in his first year in office than the three most recent presidents combined.
Viridian Rios, outlines the recent approval in July 2016 of anti-corruption reforms. Everyone agrees that this is not small feat. In the process, 14 constitutional articles need to change, 2 new general laws drafted and five more reformed. According to Forbes,
“the reform is, by far, the most encompassing system to identify and sanction corruption that the country has ever had and its effects will be felt quite soon.”
In summary, seems like some good news for the economy of Mexico.
The sombreros are off.
Image credits: University of Mexico City, ProMexico, One&Only Hotels, Aston Martin
By Penny Isabel
Thanks for reading,
Stewart Rogers USA-South Carolina