With Mexico being the 11th country in nominal terms and 15th in purchasing power, it is
evident that it is a country which can't be ignored as a third world country anymore.
Even after being hit hard during the 1994 crisis,
low blows in 2001 crisis and then again facing
major drawbacks in the 2008 recession Mexico
still remains a stable macroeconomic country.
Though the extent of influence of South American Crisis was not much, during
the 2008 recession, Gross Domestic Product contracted by more than 6%.
The main achievement for this country has been its stable growth through
a control to inflation and a constant increase in per capita income.
Despite this, among the 34 OECD countries, it still stands the last.
The areas that are causing the main problems are economical;
labor laws, income inequality, updates in infrastructure
and modernization of tax structure while socio-economic factors are the large
gap between rich and poor, urban and rural and northern and southern states.
History
The history of Mexican Economy can be outlined through three specific eras which were
governed by resource extraction, agriculture,
and a fairly underdeveloped industrial sector.
The three eras include the era of independence from colonialism, revolution
and great depression and after that World War II and the Mexican miracle.
Colonial Era and Independence
Freeing itself from shackles of colonialism and the rule of King Ferdinand again
and again, it worked as breeding grounds for major economic developments.
Then called, New Spain, First Mexican Empire ended with a military
coup in 1822 and led to the foundation of a weak constitution of 1824.
After the republic declaration of Mexico, it has been constant tough times Mexico.
During the first half of the nineteenth century, the
factors affecting the economy were largely internal.
The difficult topography, power struggles within the country and lack of
efficient transportation made it very difficult for reforms to occur.
This situation was then handled a little bit
after the construction of railway lines.
The external factors were immigration laws, joint
legislation problems, tax laws and weak foreign
policies that governed the low socio-economic growth
in the latter half of the nineteenth century.
Revolution and Great Depression
The ten year revolution period from 1910 to 1920 just erupted
the problems for Mexico as a newly instated republic.
With internal on an all-time high, 1920’s were
a time of the great worldwide depression.
The stock market crashed and the few companies
that were there in Mexico barely survived it.
Hence the drop in export revenue from $334 million to $299 million in
1924 and essentially collapsing in 1928 when the depression took hold.
During 1938, the petroleum industry was nationalized and
in 1941 Mexico recognized the National Finance Bank.
Together, they survived the great depression and this
struggle united the country towards the Mexican Miracle
World War II and Mexican Miracle
The years 1940 through to 1970 turned out to be golden for Mexico.
With the constant sustained economic growth of
3 to 4% and a general rise in enrollment of
country’s youth towards education made sure that
Mexico was looking towards the brighter days.
Additionally, the domestic market was publicized highly which led to
many consumer-based industries to foster within the nation in 1950’s.
In the years following World War II, the government spent heavily on infrastructure.
It focused all industry power and legislation on consumer goods while it
bought capital goods with the reserves that were accumulated during the war.
The gradual expansion of roadmap and rail transportation made the growth of industries
smooth during 1960’s and thus, helped generate
a GDP growth of 7% overall and 3% per capita.
Major Sectors of the economy
The service sector contributes the maximum to the GDP at
70.5%, with industrial contribution coming up at 25.7%
and agricultural contribution remaining at the meager proportion of 3.9% the
major sectors that governed the constant GDP growth in Mexico have to be:
i) Agriculture and Mining
ii) Consumer and Capital Industries
iii) Tourism and Finance.
Agriculture and Mining
Though, it is a certain pattern that we have noticed all over the world
that the countries whose agricultural contributions are the least
are generally developed nations as their main source of
income are their industries and their service sector.
This, however, was not the case with Mexico.
Their contributions to GDP via the agriculture remain lowest though
it was an important sector both historically and politically.
The main crops have not been corn despite being
a staple in the country, the agriculture
of Mexico tends to work towards horticulture and tropical fruits and vegetables.
The mining industry, since colonial times has been based
on the huge silver deposits found in the Mexican soil.
The constant productivity of silver prompted the country’s
growth worldwide as an important exporter of silver.
Consumer and Capital Industries
The industrial sector was hugely benefited from trade
liberalization and made up to 50% of the total earnings.
The main contribution towards this has been the automotive industry.
It is different from the other developing countries
because it doesn’t work just merely as an
assembly manufacturer but produces complex parts
and also takes part in the capital research.
The big three companies like General Motors, Ford, and
Chrysler have been working in Mexico since the 1930s.
Other notable industrial contributions are of the
food industry, electronics, television and computers.
Service Sector
The service sector being the highest contributor to GDP
is the most important sector of the nation’s economy.
The tertiary sector has flourished all through the 21st century.
This includes warehousing, tourism, finance,
health, education, and entertainment.
Among these, the most important ones are tourism and finance.
Tourism
Bringing in the fourth highest contribution to foreign exchange, the
tourism industry of Mexico is still the best industry in the country.
Mexico has become the 8th most visited country in the world.
Finance
Mexican banking system is private and well capitalized which makes it quite strong.
The banking sector is occupied by foreign companies
in general, with the huge exception of Banorte.
Despite having recent gains, foreign investors are still wary of the
constant changes in the policies brought about by the government.