Introduction According to John Thompson “the Mexican economy had a strong growth throughout most of 2000, most economic indicators, including manufacturing hours, industrial production, aggregate demand and the leading index, reinforced the widely held notion that Mexico’s rapid place of expansion had slowed and the economic growth would be softer in 2001”, and since this tendency exists. The next pages present an update of the Opportunities of Mexico in the global economy.
Mexican economy The economy of Mexico is 10th to 12th largest in the world. In spite of its unprecedented macroeconomic stability, which has reduced inflation and interest rates to record lows and has increased per capita income, enormous gaps remain between the urban and the rural population, the northern and southern states, and the rich and the poor. Some of the government’s challenges include upgrade of infrastructure, the modernization of the tax system and labor laws, and the reduction of income inequality. In Mexico every six years (with a change of president) there is a devaluation of the peso, that is why the people are prepared, and the last two changes of president this devaluation was not as notable as other years.
The aggregate demand is composed by the comprising private, government consumption, private and public investment and exports. Guillermo Ortiz, the
governor of Mexico's central bank, predicted â€œaggregate demand will continue to slow but perhaps not as abruptly as previously expectedâ€?.
The aggregate demand Mexico's trade deficit continued to increase in 2000. This puts pressure on the peso and may eventually compound inflationary risk. The real purchasing power of the peso is returning to levels seen prior to the economic crisis of 1995. Mexicoâ€™s transportation network is one of the most extensive in Latin America. The airports allow private investment but the government still is the major shareholder. In communications the biggest company in Mexico is Telmex which also provides some of Latin America with telephone lines and internet services. Mexico and the world Mexico is an export oriented economy; it is an important trade power as measured by the value of merchandise traded, and the country with the greatest number of free trade twelfth largest merchandise importer with a 12% annual percentage increase in overall trade. Mexico is the biggest exporter and importer in Latin America, in 2005 Mexico alone exported roughly the equivalent to the sum of the exports of Brazil, Argentina, Venezuela, Uruguay and Paraguay. The economy of Mexico is based on exports to other countries, 80% of the exports have U.S. as the destinations therefore we can say that the economy of Mexico is highly linked to the U.S. economy.
The principal countries destinations of Mexican exportations are: United States of America, Canada, Germany, Colombia, Brazil and Spain. (Promexico)
The principal countries origins of Mexican importations are: United States of America, China, Japan, South Korea, Germany and Canada. (Promexico)
The main products that Mexico exports are: Petroleum Cars Electronic equipment Avocados Tomatoes Corn Sugar cane Dry beans Beef Pork
18% of the DGP of Mexico is based on the manufacturing sector.
Mexico is the third biggest oil and gas supplier for the U.S. This represents a problem for the Mexican economy because there are no refineries therefore they cannot process the oil and as a consequence they have to import gasoline from the USA.
Mexico, the most important agreements Mexico is the world’s second country with more of Trade Agreements, counting with a 12 Free Trade Agreements, covering 44 countries in three different continents. Here are some of the most important Mexican Agreements: NAFTA: Between Mexico, Canada and USA. This is the world’s biggest Free Trade Agreement with more of 450 million habitants, which wealth and services production surpasses 16, 900 million dollars per year. And was complemented by the North American Agreement for Environmental Cooperation and the North American Agreement on Labor Cooperation. The most significant areas of friction between Mexico and USA involve trucking, sugar, high fructose corn syrup, and other agricultural products. With European Union: Include 27 countries. In 2007, total commerce was more than 47 thousand million dollars. This treaty grants the enterprises established in Mexico the opportunity to raise their exportations to a potential market of more than 445 million people. G3: Celebrated between Mexico, Venezuela and Colombia, this trade has contributed in the commercial strengthen between Mexico and South America. Venezuela has abandoned it. With Costa Rica: There were established rules that secure wealth and service national trade between these two countries, and non-taxes elimination barriers mechanisms. Since it was implanted, the trade between them has been increased over a 600%. With Bolivia: This trade has increased over a 200%.
ď‚ˇ With Nicaragua: On July, 2007, a 78% of Mexican exportations to Nicaragua had been abolished, reaching, the trade between them, the 821 million dollars.
Mexico and the foreign direct investment In Mexico, Foreign investment has been a very important rubric. For instance, Mexico has been a very important target for north American investment, reasons are that Mexico is just crossing the border for them, making it cheaper to transport the merchandise, also the Free trade Agreement, made between Canada, the United States of America, and Mexico, itself. Mexico is also a very important target for foreign investment, because Mexican Population is distinguished for being very compulsive costumers, meaning they spend their money quite fast. An average Mexican has less than 80% of their salary by the 10th day passed payday. Another factor that has very much impact on investment in Mexico is that Mexico is located between two oceans (Pacific Ocean, and the Gulf of Mexico), so it is relatively close to boats that cheap things from one place to another.
However, Mexico continued to attract a lot of business investment. The country is the world's fifth most attractive destination for foreign direct investment (FDI), competitive with before USA, Brazil, and China.
The principal countries inversions in Mexico are: United States of America, Spain, Nederland, Canada, Reino Unido and Germany.
With all this information we can conclude that the opportunities of Mexico in the global economy will not be the best in the future since the economy is highly linked to the USA. This means that when the USA has problems, Mexico will have them too and will not be able to maintain autonomy over his economy. Some solutions that could be made on Mexicoâ€™s economy are the creation of refineries and advancement in technologies. Mexico does not have an economy based on technology that is why if the government decides to invest in technology and research there might be opportunities to export the final products at a higher price and to other countries other than the USA. However, our countryâ€™s future is promising. It has increased several successful programs to simplify commerce, and thanks to them non-taxes products will grow a 65% for year 2013.
References Thompson, John (2001), "Mexico: An Update and Outlook," Federal Reserve Bank of Dallas Expand Your Insight, Retrieved October 15, 2010, from: http://www.dallasfed.org/eyi/global/0103mexico.html Global tender. Economy of Mexico. Retrieved October 15, 2010, from: http://www.globaltenders.com/economy-mexico.htm www.promexico.gob.mx