While it hasn’t received the recent media attention of other emerging economies like Brazil or India, Mexico has quietly positioned itself to be a major economic force in the long term.
One of the primary drivers of Mexico's recent growth comes from the manufacturing sector. Merchandise goods rose three percent in 2013, a modest but encouraging gain, and one that is expected to improve over the remainder of 2014. Global economic recovery is expected to help Mexico continue its own improvement, especially in the appliances industry, which is expected to grow significantly in the near future – adding up to $60 billion to Mexico’s economy through 2018.
Mexico has also benefitted substantially from the North American Free Trade Agreement (NAFTA). Though it took time and patience to see NAFTA’s effects, Mexico now exports about $1 billion worth of goods per day, which is more than ten times what they were when the NAFTA was implemented in 1994. And NAFTA is hardly Mexico's only free trade agreement. In fact, Mexico has 44 such agreements, more than both the United States and China combined.
Steady Growth
Substantial Confidence in Manufacturing
Manufacturing has indeed picked up – due in large part to foreign companies setting up facilities in-country. Much of the recent investment in the manufacturing sector comes as a result of China’s rising wages, which have made many companies looking elsewhere for manufacturing options. China’s share of the American import market has also declined, and Mexico has rushed to claim it; their trade with the United States has grown to over $500 billion annually.
In October 2013, Chrysler announced they were investing $1.3 billion to open plants in Mexico, and Audi has also invested over $1 billion to build their luxury cars in San José Chiapa. Lower labor and energy costs and a business-friendly government have made Mexico an increasingly attractive place for outside businesses looking to restructure their production.
Mexico's export market is growing as well – driven largely by growing fields within the country. Information Communication Technology alone is expected to account for 13 percent of the increase in exports from 2017 to 2020. Likewise, increased spending in the country's Research and Development sector will allow Mexico to service a broader international market. China is expected to become Mexico’s second largest export market by 2030.
Mexico has also benefitted substantially from the North American Free Trade Agreement (NAFTA). Though it took time and patience to see NAFTA’s effects, Mexico now exports about $1 billion worth of goods per day, which is more than ten times what they were when the NAFTA was implemented in 1994. And NAFTA is hardly Mexico's only free trade agreement. In fact, Mexico has 44 such agreements, more than both the United States and China combined.
Economic Big Leagues
Mexico’s increasing purchasing power, as well as key reforms passed by recently elected President Enrique Peña Nieto, have contributed to what economic experts say may become the world’s eighth-biggest economy by 2050.
In November 2013, Mexico’s Congress approved the reform of 34 financial and banking laws in an attempt to strengthen banking regulations, enhance competition, and hopefully court many of Mexico’s underbanked citizens. Under these changes, banks will have better power to collect unpaid debt, a move designed to increase overall lending confidence.
Additionally, Mexico’s forays into diversification has only solidified its status as a growing economic power, particularly with its pension funds. New demand for pension funds has played a key role in Mexico’s surging stock market, and the flurry of IPOs announced last fall was prompted largely by pension funds that are growing more confident about buying individual stocks.
Long-term Benefits Combined with Real Growth
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