Breaking Down Mexico’s Economic Landscape: Key Insights and Trends

Mexican govenrmental building and flag main

Mexico, the United States’ southern neighbor, has been home to advanced societies long before Columbus discovered America.  It currently is an emerging market economy, on the way up, while having to address various problems such as corruption, drug-related violence, and poverty. The United States is a close economic ally with some complications.  Mexico’s leading products are manufactured goods, petroleum, and tourism.  

Mexico At A Glance

The United States’ southern neighbor has been the home to advanced civilizations for thousands of years, including the Mayans and Aztecs.  The Spanish came in and overstayed their welcome.  Mexican independence was recognized in 1821.  

The country underwent many growing pains, including on and off military conflict into the 20th Century. These conflicts included the Texan independence movement and the Mexican War with the United States, which resulted in a large portion of its territory becoming a part of the United States (including Texas, California, and Southwestern U.S.).  

The population is around 130 million.  The Mexican people are a mixture of Spanish, Native American, and  African American.  They speak Spanish and local Native American languages. Christianity is the predominant religion, mainly Roman Catholic.  

Mexico is the 13th largest country in the world, being about three times as large as Texas.  It is a presidential republic.  Like the United States, Mexico is a federation, its official name being  Estados Unidos Mexicanos (United Mexican States).

It has a diverse geography with a climate that varies from tropical to desert.  

Economic Snapshot 

Mexico is a developing mixed economy.  It is a government-regulated market economy that has not yet achieved top economic status.  Mexico is among the top 15 world economies.

Mexico’s currency is the peso.  

The major industries are food/beverages, tobacco, chemicals, petroleum, mining, motor vehicles, and tourism.  Mexico is a major producer of oil but is not part of OPEC.  They have a close relationship with OPEC countries known as OPEC+.

The average person works in a service job (60%) while the rest is roughly split between industry (25%) and agricultural labor (15%).  Mexicans have been found to be the hardest workers but this has been of mixed benefit to the workers themselves; 44% live in poverty today.  

U.S.-Mexico Relations 

An international border has never removed the close relationship between Mexico and the United States.  Mexico is our largest goods trading partner, that is, a country to whom we buy and sell goods.  Each nation greatly influences the society of the other.  

Many documented and undocumented immigrants cross into the United States each year.  Many are seeking political asylum from various Latin American troubles but often people are simply trying to improve their economic situation.  

Mexico has for a long time been a major source of cheap labor to the United States, especially farm labor.  The North American Free Trade Agreement (NAFTA) between Canada, the United States, and Mexico in 1994 set up a free trade zone.  

Free trade involves agreements between countries to not put in place major barriers to trade such as high tariffs (taxes) on goods.

The agreement was later revised with the U.S.-Mexico-Canadian Agreement (USMCA) ratified by Mexico in 2019.  Low labor costs have encouraged many U.S. companies to “outsource” their production to places like Mexico.  

The United States is the primary (75%) source of Mexican exports.  The Mexican imports also largely arise from the United States, with over half coming from their northern neighbor.  The next largest source of Mexican imports is China, and that is only around 15%.  

Mexican Cartels

Both countries also have worked together to address the illegal drug traffic, which is not only a major underground economy but a threat to the social and political system in Mexico. 

Large groups, known as drug “cartels,” use a portion of their vast profits to pay off judges, officers, and politicians.  The cartels use violence, including against the government, to retain power.  

Border issues continue to be a divisive issue in the United States, including the Trump Administration supporting the building of a “wall” between the countries.  The greatly divided state of our political system, however, has made it hard for the U.S. to agree on reforms.  

Mexico’s Economic Future 

Mexico is the second-largest Latin American economy after Brazil.  The World Bank labels it as an “upper-middle income” nation though 44% of its people live in poverty.  

Mexico has shown modest economic growth in recent years (a few percentage points) with a drop-off because of COVID-19.  This is somewhat disappointing but still impressive with its various domestic difficulties, including drug-related violence and political corruption.   

A diverse economy with strong oil and manufacturing sectors and strong markets right nearby in the United States and Canada provides a reason for optimism.  Mexico does need to address various problems including corruption, poverty, and a continuing large illegal economy.  

It is an “emerging” global economy, which means it is on the way up, but still has a ways to go.

Teach and Thrive

A Bronx, NY veteran high school social studies teacher who has learned most of what she has learned through trial and error and error and error.... and wants to save others that pain.