Mexico

Being one of the largest countries in the cosmea, Mexico boosts its territorial area amassing al almost 2 million square kilometers of land. Apart from this, Mexico in addition has a diverse topography as manifested by its accessible climate. At any time of the year, it has been say that Mexico has a amelio station climate especially in many p arts of its central highlands and some of its coastal locations.Although this has been the case, Mexicos parsimony is said to be mostly driven by tourism, industrial harvest-timeion, oil and gas production, textiles and clothing, and tillage. It has besides been a worldwide fact that Ameri green goddesss visit Mexico more often than any other countries in the world because of its attractive and favorable tourist destinations. In addition, there has been numerous factories which nurture been built to take advantage of the lower labor costs of Mexico. Aside from the vast industrial milieu, Mexico to a fault has been contributing almost 1/5 of the worlds oil reserves. Mexicos betingly progressive economic activity is mainly attributed to its wide production as nearly as exports on a wide selection of artless goods.Meanwhile, it has long been said that the economy of Mexico is characterized by a free market. In novel propagation, its complete(a) domestic product has surpassed almost a trillion dollars which makes it one of the largest economies in the world. It is also firmly established as an upper middle-income state of matter with the highest income per capita in Latin the States in market exchange rates. However, Mexico is the only Latin the Statesn country to be member of the Organization for Economic Cooperation and Development.Since the 1994 crisis, subsequent administrations were said to have greatly influenced the improvement in the macroeconomic fundamentals of Mexico. After its slow return in 2001, it pull downtually managed to maintain a small corroboratory growth. Although Moodys (in March 20 00) and Fitch IBCA (in January 2002) have issued favorable investment-grade ratings for its sovereign debt, Mexico still needs to look for possible remedies to alleviate societal problems. Even if there has obtained a p outliveered level of macroeconomic stability that has reduced inflation and interest rates to record lows and affixd income per capita, there still exists problems regarding social inequities. These problems include the need to rise infrastructure, modernize the tax system and labor laws and reduce income inequality.The economy of Mexico contains a mixture of modern and outmoded industry and agriculture. These economic segments of Mexico are said to be mostly dominated by the nonpublic firmament. However, recent administrations have grow competition in sea ports, railroads, telecommunications, electricity generation, immanent gas distribution and airports with the use up of upgrading infrastructure. Meanwhile, near 90% of its work considering that Mexico i s an export-oriented economy is under free betray agreements (FTAs).The Free trade agreement is composed and agreed upon by almost 40 countries including the European Union, Japan, Israel and many countries in Central and South America. However, the most influential among all free trade agreements is the NAFTA. NAFTA has said to have existed in 1994 and was sign(a) in 1992 by the governments of the get together States, Canada and Mexico. In 2006, trade with its northern partners accounted for close to 90% of Mexicos exports and 55% of its imports, with the great help from the free trade agreements.After five decades of political upthrow by and by independence in Mexico, the four consecutive administrations of President Porfirio Daz was said to be the igniting factor for the economic progress of Mexico. During his term, the locomote force of the 19th century in Mexico has brought about economic growth as manifested with numerous alien investments and by in-migration. Also wi th his term, President Diaz was able to develop an high-octane railroad system as well as the great use of natural re cums.It has also been said that during Diaz term, the gross domestic product of Mexico was also grasp those of Argentina and Uruguay during circa 1900 and it was almost three times more than the gross domestic product of Brazil and Venezuela. Its annual economic growth amidst 1876 and 1910 has also averaged by 3.3%. However, its inequitable land distribution system led to the Mexican Revolution in 1910-1917, which has transformed the fundamental aspects of Mexican living. This armed conflict was said to be due to political repression and fraud as well as large income inequalities. Then, large haciendas were mostly owned by a few but worked by millions of underpaid peasants living in precarious conditions.Meanwhile, during 1930 to 1970 Mexico was dubbed by economic historians as the Mexican Miracle. This period is said to be characterized by economic growth as sp urred by a model of import- commuting industrialization (ISI). This model has protected and promoted the development of national industries. Through the ISI model, the country experienced an economic boom through which industries rapidly expanded their production.Important changes in the economic structure include the free land distribution to peasants under the concept of ejido, the nationalization of the oil and railroad companies, the introduction of social rights into the constitution, the birthing of large and influential labor unions, and the upgrading of infrastructure. From 1940 to 1970 GDP increased six fold, whereas population doubled. The ISI model had reached its peaked in the late 1960s.During the 1970s, the administrations of Echeverra and Lpez Portillo tried to exalt the economy and began to include social development in their policies, an effort that entailed more public sp completion. However, the government opinionated to borrow from international capital market s to invest in the state-owned oil smart set which in turn seemed to provide a long-run income fount to promote social welfare in the advent of the discovery of huge oil fields during those times where oil legal injurys were surging and international interest rates were low and even negative.In fact, this method has produced a remarkable growth in public expenditure, and President Lpez Portillo announced that the time had come to learn to manage prosperity. This period of prosperity, however, was accompanied by the mismanagement of resources and inflation.In 1981-1982, the international medical prognosis changed abruptly. This has been manifested by oil prices eventually plunging as well as the detrimental increase in interest rates. In 1982, President Lpez Portillo before ending his administration decided to suspend payments of foreign debt, devalued the peso and nationalized the banking system along with many other industries that were severely affected by the crisis.While i mport substitution had produced an era of industrialization in previous decades, it was evident that that protracted protection had produced an uncompetitive industrial sector with low productivity gains. Meanwhile, President de la capital of Spain was the commencement exercise in the series of presidents that began to implement neoliberal reforms.After the crisis of 1982, lenders were unwilling to return to Mexico and in order to keep the current account in balance. With this, the government has decided to resort to currency devaluations which has produced an effect that sparked unprecedented inflation. Its inflation rate has reached its historical high in 1987 at approximately 159.7%.In order to stabilize all the ominous economic activities in Mexico, Mexico has decided to liberalize its trade policies. It has been said that the first step toward the liberalization of its trade was the incorporation of Mexicos signature of GATT in 1986. During the Salinas administration in Mexic o, state-owned companies were privatized with the nonable exception of the oil industry and energy since these industries were primarily protected by their constitution. In addition, the North American Free Trade Agreement was signed in 1992 between the United States, Canada and Mexico.Soon after, the signature of two additional supplements on environments and labor standards came into effect on January 1, 1994. Aside from these, the Salinas administration also introduced strict price controls and negotiated smaller minimum wage increments with labor unions with the aim of curbing inflation. While his strategy was successful in reducing inflation, economic growth pf Mexico has averaged only 2.8 portion a year. Although this has been the case, it barely shows that little by little Mexico is slowly recovering from the past mistakes of previous administrations. Also, the move to liberalize the trade policies would historically help them go through that there would exist positive ec onomic growth for the people.After several administrations trying to pose remedy on seemingly difficult-situated economy of Mexico, the Salinas government proved that Mexico can still be at par with the economic activities of other countries in the world. Meanwhile, the Mexican economy rather its official money gained strength by enforcing a fixed exchange rate. It has been said that the peso has become overvalued while the consumer spending increased. With this Mexicos current account deficit to reach 7% of gross domestic product in 1994, which was primarily financed through public debt instruments called tesobonos.This financing system has reassured Mexicos payment in dollars. However, the momentary economic growth was again placed in a bad light after the Chiapas revolt and the assassinations of the most-likely to win presidential candidate as well as the nations prosecutor in 1994, which eventually move an unfavorable message to investors, both existing and potential.Meanwhile, public debt holders rapidly sold their tesobonos which depleted the Central Banks reserves. Portfolio investments, on the other hand, which had made up 90% of substance investment flows, left the country as fast as they had come in. This unsustainable situation eventually forced the Zedillo administration to abandon the fixed exchange rate because this seemingly has not proved great worth to the Mexican economy.During that time, the peso neatly devalued and the country entered into an economic crisis in 1995. The boom in exports as well as an international rescue package crafted by American president Bill Clinton in a certain way helped cushion the crisis. And after less than 18 months, the economy of Mexico was seen to be slowly recovering again. During that 18 months, the annual growth rate of Mexico was aid to have averaged for about 5.1 percent between 1995 and 2000.President Zedillo and President Fox continued with trade liberalization. During their administrations, several free trade agreements were signed with Latin American and European countries as well as in Japan and Israel in order to maintain macroeconomic stability. With this, Mexico became one of the most open countries in the world to trade and its economy base shifted accordingly. The total trade of Mexico with the United States and Canada eventually tripled and its total exports and imports almost quadrupled between 1991 and 2003. Mexicos economy is now characterized with a favorable rating as foreign investment was changed from portfolio to foreign-direct investment (FDI).During the last quarter of 2000, it has been said that the Mexican economy grew at an annual rate of 5.1 percent which has marked its twentieth consecutive quarter of economic growth. For the entire year, the gross domestic product of Mexico then increased by 6.9 percent, the second highest growth rate in two decades. Indeed, the implementation of sound fiscal and monetary policies during 2000 enabled Mexico to achieve, and in most cases outperform, the main economic targets established at the beginning of the year.In addition, Mexicos gross domestic product (GDP) in 2000 grew by 6.9 percent in real terms, 2.4 component points higher than the original target of 4.5 percent. In current prices, its GDP amounted to 5,432.3 billion pesos (approximately US$574.8 billion). This increase was brought about by the 10 percent expanding upon in gross fixed capital formation which was supported by the increase in private investments, and by an 8.7 percent growth in private consumption. On the other hand, public spending was said to have registered only a moderate 3.5 percent increase during the year.The most vigorous component of come demand during that time was the export sector, which expanded at an annual growth rate of 16 percent. For 2000 as a whole, the value of exports totaled US$166.4 billion. In terms of sector performance, the primary sector which included the agriculture, livestock, fishing and f orestry has expanded at a rate of 3.4 percent in 2000. Meanwhile, the industrial sector which included the mining, manufacturing, construction and electricity as well as the services sector, which included commerce, transportation, communication and financial services, grew only by 6.6 and 7.4 percent, respectively.In an article written by Dickerson, however, Mexicos economy slowed in the last three months of 2006. This was aid to have been brought about by the consequences in the United States Tough times in Mexico typically fuel immigration north of the border. In the same year, it has been said that Mexicos gross domestic product only expanded 4.3% in the October-to-December period from the final quarter of 2005 establish on the figures released by the finance ministry. It was said to be the third consecutive period of poky growth in the nations economic output as manifested with a sharp decline from the 5.5% expansion registered in the first quarter. The deceleration was blamed largely on a sluggish factory sector and a slowdown in exports to Mexicos principal customer, the United States.In 2006, Mexico only posted GDP growth of 4.8% which has been considered the strongest since 2000. High oil prices pumped record tax revenue into government coffers. The economy of the United States, Mexicos biggest trading partner, is also weakening. Meanwhile, Mexicos inflation has been rising, its oil production is slipping, and the nations bellwether auto sector has hit a speed bump. Its inflation has been greatly manifested by soaring unemployment as well as rising prices on basics including tortillas, milk and eggs have sparked street protests. The unemployment rate of most of its people was also affected with the slower rate of remittance by those working outside their country.It has been said that most Mexican families only rely on the remittances sent home. Remittances have become the nations second-largest source of foreign exchange behind oil revenue. The slowd own in economic growth is attributed also to manufacturing. Mexicos factory or manufacturing sector only expanded 3.1% in the final quarter of the year. In the first three months of the year, it grew by only about 7% which was driven by a rebound in producing automobiles.The Mexican plants of Ford Motor Co., General Motors Corp. and DaimlerChrysler has only accounted for about 70% of the cars assembled in Mexico and most of which end up in American showrooms, not also in Mexico since customers as surely to swarm over luxury vehicles when it would be showcased in the United States. entirely, the U.S. gross revenue slump has trimmed Mexican production of vehicles as well as its exports after it only acquired a 5% growth rate in December. The front accelerated in January as exports tumbled to 88,915 vehicles, a 20.7% drop from January 2006.In last year, Mexicos overall export growth also slipped to 6% in November and 4% in December after an average increase of 19% over the first 10 m onths of the year. Its Industrial production barely grew a 1.6% rate in December, much lower than forecasts made by most economists. Meanwhile, consumer prices have also been predicted to be rising. Mexico ended 2006 with an inflation rate of 4.05%, up from 3.3% in 2005. This was said to be brought about mainly by skyrocketing prices for agricultural products which include tomatoes, tortillas and other basic foodstuffs. However, this phenomenon of skyrocketing agricultural prices could force Mexicos central bank to raise interest rates, which could eventually help put a stop to inflation while become a impression to economic growth.On the other hand, Mexicos oil sector was said to have not contributed much to the economic growth of the country in 2007. This has been manifested by the continuing increase in petroleum prices although it has declined steeply since last summers record highs, meaning less oil revenue for Mexicos treasury. Production also has fallen sharply at Cantarell, its largest oil field, a major worry in a nation that last year relied on petrodollars to fund nearly 40% of public spending.As earlier stated, the remittances which has also become part of the economic activity in Mexico have shown signs of sluggish growth. Mexican workers last year only remitted almost $23 billion to their families. But the pace of growth decelerated markedly over the course of the year. In the first quarter of 2006, remittances grew 27.5% compared with the January-to-March period in 2005. In the final three months of last year, remittances were up just 5.5% over the same period the year before. However, November and December were seen to actually be stagnated in terms of growth.It has also been said that the slower economic growth of Mexico could be a result of tighter U.S. border enforcement. To some, it is a sign of progress for border agents but a potential blow for Mexico, where remittances have become a pillar of the economy.Agriculture, as a percentage o f GDP, has been steady declining. However, this has been also encountered ny most developing nations as it plays a smaller role in the economy. In 2006, the agriculture sector of Mexico has accounted for only 3.9% of GDP, down from 7% in 1980, and 25% in 1970. Nonetheless, given the historic structure of ejidos, it still employs a considerably high percentage of the work force 18% in 2003 which are mostly of basic crops for subsistence as compared to 2-5% in developed nations in which production is highly mechanized.In spite of creation a staple in Mexican diet, Mexicos comparative advantage in agriculture is not in edible corn, but in horticulture, tropical fruits and vegetables. Negotiators of free trade agreements are expected that through liberalization and mechanization of agriculture, two-thirds of Mexican corn-producers would naturally shift from corn production to horticultural and other labor-intensive crops such as fruits, nuts, vegetables, coffee and sugar cane. While ho rticultural trade has drastically increased due to these agreements, it has not absorbed displaced workers from corn production which has been estimated at around 600,000.Moreover, corn production has remained stable as a result of income support to farmers or a reticence to abandon a millenarian tradition in Mexico not only have peasants grown corn for millennia, corn originated in Mexico. Even today, Mexico is still the fourth largest corn producer in the world.Meanwhile, the industrial sector as a whole have benefited from trade liberalization. In 2000, it has been said to have accounted for almost 90% of all export earnings. As earlier stated, the most important industrial manufacturer in Mexico is the automotive industry This industry are internationally recognized for their standards of quality. Although this has been the case, the automobile sector in Mexico differs from that in other Latin American countries and developing nations in that it does not function as a mere assem bly manufacturer.The industry produces technologically complex components and engages in some query and development activities. The Big Three which includes General Motors, Ford and Chrysler have been operating in Mexico since the 1930s. Volkswagen and Nissan on the other hand had only built their plants in the 1960s. Now, even other car producers such as Honda, BMW, and Mercedes-Benz have joined in. Given the high requirements of North-American components in the industry, many European and Asian parts suppliers have also moved to Mexico for one reason alone, that is, because most labor oriented employment has been subjected to lower costs.Meanwhile, some large industries of Mexico include Cemex the third largest cement conglomerate in the world in term of alcohol beverage industries has represented a meager amount in the economic activity of the country. It has been said that high-tech industrial production represented 21% of total exports, the highest in Latin America. Apart fro m Cemex, the alcohol beverage industry includes world-renowned players like Grupo Modelo, or conglomerates like FEMSA, which apart from owning breweries and the OXXO toilet facility store chain, is also the second-largest Coca-Cola bottler in the world. It also include Gruma, the largest producer of corn flour and tortillas in the world, Bimbo, Telmex, Televisa, and many other high-tech industries, many of which are based in Monterrey.Maquiladoras or the Mexican factories which take in imported raw materials and produce goods for export have become the nucleus of trade in Mexico. This sector has benefited from the free trade agreements being pushed by several administrations in Mexico. The real income in the maquiladora sector has increased 15.5% since 1994, though from the non-maquiladora sector has grown much faster.Contrary to fashionable belief, this should be no surprise since maquiladoras products could enter the US duty free since the 1960s industry agreement. Other secto rs now benefit from the free trade agreement and that the serving of exports from non-border states has increased in the last 5 years while the share of exports from maquiladora-border states has decreased.Meanwhile, mineral resources are the nations property by constitution. As such, the energy sector is administered by the government with varying degrees of private investment. By fact, Mexico is the fifth-largest oil producer in the world with the capacity to produce about 3.8 million barrels per day. The public company in charge of administering research, exploitation and sales of oil and is considered the largest oil in Latin America is Pemex, which makes $86 billion in sales a year. Their sales constitutes a sum larger than the GDP of some of the regions countries.However, although it has been said that Pemex is the largest oil company, their growth is temporarily hampered with the imposition of high taxes, which eventually is a significant source of revenue for the government . Without enough money to continue investing in finding new sources or upgrading infrastructure and being protected constitutionally from private and foreign investment, some have predicted the company may face institutional collapse. While the oil industry is still relevant for the governments budget, its importance in GDP and exports has steadily fallen since the 1980s. In 1980 oil exports accounted for 61.6% of total exports by 2000 it was only 7.3%.On the other hand, the service sector was estimated to account for 70.5% of the countrys GDP, and employs 58% of the active population. This section includes transportation, commerce, warehousing, restaurant and hotels, arts and entertainment, health, education, financial and banking services, telecommunications as well as public administration and defense. Mexicos service sector has been strong, and in 2001 it replaced Brazils as the largest service sector in Latin America in dollar terms.Moreover, the tourism industry is also one of the most important industries in Mexico. It is the fourth largest source of foreign exchange for the country. Mexico is the eight most visited countries in the world with over 20 million tourists a year.Meanwhie, the financial and banking sector is increasingly dominated by foreign companies or mergers of foreign and Mexican companies with the notable exception of Banorte. The acquisition of Banamex, one of the oldest surviving financial institutions in Mexico, by Citigroup was the largest US-Mexico corporate merger at 12.5 billion USD. Banamex generates almost three times as much revenue than all 16 Citigroups subsidiaries in the rest of Latin America. In spite of that, the largest financial institution in Mexico is Bancomer associated to the Spanish BBVA.The mental process of institution building in the financial sector in Mexico has evolved hand in hand with the efforts of financial liberalization and of inserting the economy more fully into world markets. The financial sector is becoming stable over the years with the acquisitions of foreign institutions such as US-based Citigroup, Spains BBVA and the UKs HSBC. Their presence coupled with a repair regulatory framework has allowed Mexicos banking system to recover from their financial crisis manifested by the peso devaluation.Pubic modify as well as in lending in the private sector is increasing and so is activity in the areas of insurance, leasing and mortgages. However, bank credit accounts for only 22% of GDP, which is significantly low compared to 70% in Chile. Although lending has been widely accepted now in mexico, credit in the agricultural sector has fallen 45.5% in six years from 2001 to 2007 and has now represented about 1% of total bank loans.It has been described by critics that Mexicos economy is like an airplane flying with only one engine, that engine-exports-is powerful enough to keep the country from crashing but not powerful enough to lift the whole country. Unless the motor of domesti c demand turns over as well, Mexicos economy will never rightfully take off. Mexicos current economic system fails to generate even a fraction of the one million new jobs that Mexicans seek each year, and it does not seem to promise rapid growth in the future. Indeed, one unstated but inescapable conclusion is that Mexico cannot hardly catch up to its free-trade partners in North America even at par with their respective living standards.Mexicos economy which ahs said to be undercapitalized, inefficient, mistrusted, and biased in favor of large enterprises have remained a mug or a serious barrier to broad-based economic growth. A few thousand large agro industries like exporting fruits, vegetables, and some livestock have anchor considerable success. Meanwhile, a significant proportion of commercial producers are bankrupt.The peasant maize economy is battered by free trade, but it will not disappear because there is a dearth of alternative employment. Good agricultural lands go u ncultivated because farmers cannot compete with imports from the United States, while poor peasants deplete natural resources on lands poorly suited to agriculture.A third problem that surface at some points is the collusive nature of business-government relations. Mexico often remains a country where kale are privatized and losses socialized.Underlying many of Mexicos problems is the need for more government revenue. Budget reductions have been responsible for rather striking cuts in government investment, which in turn, have dampened domestic demand and weakened certain sectors of the economy. Tax collection as a percentage of gross domestic products actually fell during the 1990s, a trend that underscores how inadequate has been the focus on the revenue side of Mexicos budget. The problem is especially acute with regard to social spending. Mexico could potentially afford close-to-universal health care coverage and more extensive antipoverty programs all it would really need to do is raise taxes by about 5 percent of GDP.WORKS CITED(1996). Mexico Economy. Retrieved 18 April 2007, from Travel Document Systems, Inc. Websitehttp//www.traveldocs.com/mx/economy.htm.(2003). Economic Report Mexico. 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Confronting Development Assessing Mexicos Economic and brotherly Policy Challenges Latin America. Retrieved 17 April 2007, from Massachusetts Institute of Technology Websitehttp//findarticles.com/p/articles/mi_qa4000/is_200404/ai_n9363872/pg_4.Mexico. Britannica Book of the Year, 2004. 2007. Encyclopdia Britannica Online. 18 Apr. 2007