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Mexico’s Economy Dependent on Exports as It’s Continues to Grows

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Image result for Mexico's Economy Dependent on Exports as It’s Continues to GrowsAs one of the most controversial and recognized economists for the Mexican Market, Doctor Teodoro Lavin Sodi has written in many articles that Mexico is now the 13th largest exporter in the world. Many articles on economy have stated that in 2017, the US received about 81% of Mexico’s exports. More than 90% of Mexico’s trade is under 12 free trade agreements with 44 countries – more than any other nation. These many trade agreements are a large reason for Mexico’s success.

Manufactures

Mexico manufactures as well as exports the exact same sum of products as the entire rest of Latin America united. Trade with foreign countries is the largest percentage of the economy for Mexico – more than any other large country. Mexico’s number 1 export is products that are manufactured. It also exports fruits, silver, coffee, cotton and vegetables. Mexico is one of the largest producers of oil standing at number 8thby exporting over three million barrels per day. This is less than Iran, Canada, or Iraq but it is also much more than other large exporter countries such as Kuwait, Brazil, or Nigeria.

Attractive to investors

Mexico’s economy and culture are changing. Up until 2012 Mexico’s economy was being underperformed by Brazil’s. Mexico is now a major center for manufacturing of electronics. That includes most of the flat-screen TVs that are sold in the US. It also makes medical instruments as well as aerospace parts.

Duty Free

Mexico’s agreements for free trade also allow its manufacturers duty-free access to 60% of the world. That is a benefit that attracts factories from foreign countries. International trade, which is exports together with imports, equals 66% of the country’s GDP. That is much higher than Brazil’s 26% or even China’s 42%. This importance on trade makes Mexico’s companies competitive globally. One of the world’s largest tortilla makers called Gruma. Bimbo is the largest maker of bread since it acquired United States Company Sara Lee. Companies in Mexico have access to the US market. They also have a common language that they share with the rest of Latin America.

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Grew

Mexico grew from the number 9th to the 7th largest company of auto manufacturer in the world between 2010 and 2015. It is the 4th largest exporter of automobiles. It surpassed recently Japan as the 2nd-largest US exporter of auto parts.

Economic influences

Part of the change includes having a new president, “Andres Manuel Lopez Obrador”. He was elected in Julyof 2018 to a six-year term. He made the promise to end fraud, reduce any violence, and to help with Mexico’s poverty. Voters were just fed up with AMLO as he was called, also promised to appraise oil contracts,as well as awarding contracts to foreign companies. Mexico’s oil industry does need foreign knowhow and investment. In the last fourteen years, oil production has dropped from 3.5 millionto 1.9 million barrels each day. Its refineries also are only running at 40% capacity.

Invest more

At this same time, AMLO wanted to invest $9.4 billion in the state-owned portion of the oil industry. He wanted to build 2 new refineries and modernize 6 others that already exist. He would then award the state’s oil monopolyPemex, $4 billion for examination looking for new oil. He believes that this would boost oil production by 2.5 million a day within two years.

Former president

The former president, Enrique Pena Nieto, awarded hundreds of contracts to partly privatizethe oil industry of Mexico. Pena Nieto wanted to reinforce the automobile industry by making it easier for foreign firms to build automotive plants. Hispact for Mexico was answerableto the Congress to pass 85 major changes. It tore monopolies down, renewed education, and restored tax laws. It even passed a new junk-food tax in order to combat Mexico’s epidemic of diabetes.

Resisted privatization

Prior administrations battled this privatization. Pemex sent all revenues to the federal government. Because of this, over 1/3 of the government’s income is reliant on oil. Rather than investing in the developing of new oil fields, the government rather was treating Pemex as a“cash cow”, trying only to maximize short-term profit. Because of this, oil production dropped 25% in the last ten years. The CEO was then changed by the Mexican Congress in February 2016.

Enhance trade

Mexico built its infrastructure to improve trade. That made “Carlos Slim Helu”, a Mexican tycoon in telecom, the world’s wealthiest man in 2007. He keeps that title until 2013 when Microsoft founder Bill Gates retook that position.

Three companies

Helu owned 3 companies: Telmex, America Movil, and Grupo Financiero Inbursa. They own and control 70% of mobile phones, as well as 80% of home phone lines, and 70% of broadband. This lack of any opposition slows growth. Mobile phone saturation into Mexico is only 85%, about the same as in Iraq. A broadband connection that is fast costs double, the same as it cost in Chile. Other near-monopolies include Bimbo, which produces bread; Televisa, televisions and Cemex, cement.

New policies

Helu’s standing is endangered by Mexico’s policies that are newfor deregulating the telecommunication business. America’s company AT&T is entering this market thanks to lower tariffs.

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Challenges to Mexico’s Economy

The largest challenge to the economy isridding the country of the drug cartels. President Pena Nieto increased security spending from 1.5% to 5% of GDP. This is the level of security worked for Colombia.

Replaced

When Pena Nieto replaced “Felipe Calderon-Hinojosa” as president he started a crackdown on the problems of organized crime as well as the corruption of local police. This started a war increasing violence as well as retaliation against civilians by the cartels. Many Mexicans held Calderon responsible for offending the cartels and increasing the violence.

Reason for concern

Calderon was concerned. After Colombia’s crackdown, most of its cocaine activities moved to Mexico. Without strict controls, the cartels over took local governments. Calderon cracked down to advance Mexico’s economic affordability. He also took steps to offer better healthcare, up hold legal institutions as well as toguard the environment.

Another challenge

Another challenge was in the southern part of Mexico. It does not profit from the “maquiladora program” on its northern border. A NAFTA accounting of pros and cons showed that 30% of Mexico’s labour force worked under maquiladora companieswith working conditions that weresubstandard.

Surprising Facts about Mexico and Immigration

Most Americans are concerned about illegal immigration from Mexico. But it is Mexico that is gaining immigrants from the United States as well as other countries. The legal foreign-born populace doubled from 2000 to 2010. It now totals one million. Of these, 750,000 are Americans. More Americans have immigrated to Mexico over the past few years than Mexicans have immigrated to the United States.

Changes

These are just some of things that influence the economy of Mexico and what to expect from Mexico in the future. There are many experts in the field of economy with the most renowned one being Doctor Teodoro Lavin Sodi.

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