Economy In Mexico

Is Mexico Your Dream Destination?


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The Economy of Mexico Is Continually Developing

Reviewed by Lief Simon

Lief Simon is the managing editor of Global Property Advisor, Simon Letter, and Offshore Living Letter. He has purchased more than 45 properties, investing in 23 different countries around the world.

A road in Mexico City, Mexico
iStock/diegograndi

Mexico remains a top destination among Canadians and Americans for both tourism and retirement. Thanks to restricted travel and an expanding middle class, Mexico is enjoying good growth in the local tourism market in 2021.

All that combines to make Mexico a top choice for a property rental investment. Also, this is part of Mexico’s recovering economy.

Top markets include Puerto Vallarta on the Pacific coast and Playa del Carmen on the Riviera Maya. In both of these popular tourist towns, a rental property can generate excellent yields.

Mexico offers financing options for non-residents, generally from U.S. lending institutions set up in Mexico specifically for that purpose. So, that is also a big reason why they’re part of the best places to buy real estate overseas.

The Mexican Economy

The economy in Mexico is among the largest in the world with the IMF ranking it at number 15. According to the IMF, Mexico’s GDP (purchasing power parity) is the second largest in Latin America and 11thlargest in the world.

Since the North American Free Trade Agreement (NAFTA) took effect in 1994, Mexico has increased their manufacturing capabilities substantially to become a key supplier for the U.S. market. A large majority (90%) of Mexico’s trade falls under their numerous free trade agreements.

Above all, the Mexican economy bounced back strongly after the 2009 financial crisis. However, the economy fell back to its pre-crisis average through much of the 2010s. At the end of the decade it started to fall away.

By the end of 2018 the economic growth rate had fallen to 2.1%. In 2019 it fell further, to -0.1%. The impact of COVID-19 means forecasts for 2020 are for -6.6%.

On the other hand, the future looks brighter and models predict 2021 will see an uptick to 3% growth.

2020 was difficult for economies globally but Mexico has the natural resources to recover.

For example, a lot will depend on how well they can harness worker productivity. Mexico has traditionally performed poorly here.

In the last decade, the Mexican government made major reform in the communication, education, energy, and financial sectors, with a goal to increase Mexico’s overall economic competitiveness.

Financial Disparity Within Mexico

Cancun, Mexico
iStock/Iren_Key

The Mexican economy clearly shows disparity between different regions and social groups.

The income inequality in Mexico is perfectly shown by the looking at Carlos Slim. The communications mogul is said to have a net worth of over 5% of national GDP.

According to theOrganization for Economic Co-operation and Development, Mexico has the second highest level of economic disparity in the world, surpassed only byChile.

However, this disparity is declining, as social and education programs are becoming more widely available.

Disparity can be clearly seen by comparing different regions. Above all, the northern regions account for a much higher level of development and economic growth than those in the south.

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The Outlook For The Mexican Economy

Going forward, Mexico’s economy should recover well and then next decade holds promise. In short, Mexico’s macroeconomic success continues to attract private investors.

The unemployment rate is expected to rise in 2020, to above 5%. After that it should drop back to somewhere in the 3.5% range is forecast.

On the other hand, the Mexican economy is closely linked with that of the United States.

A strong U.S. economy would be good news for Mexico in the coming years. Exports are expected to increase. But, with the United States buying less from Mexico, the need to find other trading partners is pressing.

Above all, Mexico is the most accessible country in the region from the United States and Canada.

Economy In Mexico - Statistics

Real annual growth rate (2022): 2.1%

Per capita income: US$7,577.23 (2022)

Avg. inflation rate: 5.8%

Natural resources: Petroleum, timber, gold, silver, copper, iron, zinc

Primary sectors(62.4% of GDP): Hotels and restaurants, tourism, financial, trade, and transport and communication.

Secondary sectors(34.2% of GDP): Manufacturing, electricity and water supply, and construction.

Tertiary sectors(3.5% of GDP): Agriculture, forestry, fishing, farming, and mining.

Exports: US$430.9 billion: coffee, cotton, fruits, vegetables, manufactured goods, oil and oil products, silver

Major trade markets: U.S. (80.3%), Canada (2.7%), China (1.5%)

Imports: US$434.8 billion: agricultural machinery, aircraft, aircraft parts, automobile parts (repair, assembly), electrical equipment, metalworking machines, and steel mill products.

Major suppliers: U.S. (49.1%), China (16.6%), Japan (4.4%), Germany (3.5%)

Labor force: 57.1 million

Unemployment rate(2023): 2.83%

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Is Mexico Your Dream Destination?


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