Mexico Economy Policy

ECONOMIC POLICY – According to various economic and social indicators, Mexico falls within the developed countries (the average per capita income is $ 12,700, over 90% of the population is literate, life expectancy is around 76 years); but the fact that about 40% of the population is below the poverty line testifies to the serious imbalances in income distribution and social conditions, at the origin of internal problems, with territorial implications, as in the case of the State of Chiapas. Intense and sudden changes have had repercussions on the country’s macroeconomic situation, also as a result of joining NAFTA, and then APEC and OECD (to which a free trade treaty with the European Union was added).

According to Indexdotcom, after the revolution of 1910-20, the depression of the 1930s, the agrarian reforms and nationalizations carried out by President L. Cárdenas, the economic revival of Mexico began around 1940. A mixed system was formed, with a public sector planned and a private one in which the foreign presence prevailed, in particular the United States, which until the 1970s aimed at industrialization, the creation of communication infrastructures and the extension of the benefits of growth to wider sections of the population. Large plumbing works increased the production of electricity and irrigated surfaces. The exploitation of the Caribbean oil fields allowed Mexico, between 1979 and 1982, an average annual growth rate of 8-9%. Later, the need to reduce the debt, through financial restrictions, which had an impact on the middle class and on the poorest, it led the GDP to grow by 0.7% per year in the period 1980-90, while the real average income decreased by 1.6% per year. Foreign debt renegotiated (1990) and inflation and public spending controlled, a so-called system of social liberalism was promoted: the most important companies in the sector of telephones, air transport, steel mills and copper mines were privatized, and in part the banking system; the arrival of foreign investments was favored and the laws protecting the oil, pharmaceutical and electronic industries were eliminated; both the minimum wage and the price of fuel and indirect taxes increased. Liberalization also affected landed property. In the early 1990s privatization was intensified, exchange controls abolished, value added tax reduced, the devaluation rate halved against the dollar, and the minimum wage increased by 12%. The following decade saw GDP growth settle at 3.5% per annum. But a serious financial crisis, which exploded at the end of 1994 following international monetary speculations, produced an unprecedented economic crisis in the two-year period 1995-96: global GDP fell by 6.2% and that per capita even by 7.8% in just one year. Restrictive fiscal, monetary and wage policy measures, the restructuring of foreign debt and international loans made it possible to reduce the sharply increased rate of inflation and the state deficit, but at the cost of a severe restriction of economic activity and a contraction in employment and real wages. The recession was quickly overcome, especially as the devaluation increased the competitiveness of exports. The normalization of the financial markets and the restructuring of the debt produced a new inflow of foreign capital. The free trade treaty with the United States and Canada, which entered into force in 1994 (NAFTA), has produced a positive integration process.

In the early 20th century. GDP growth was slightly higher than previously, with low inflation and unemployment; but, as before, it is mainly the maquiladoras companiesto support growth (approx. half of exports), however at the expense of workers’ conditions. The trade balance, traditionally passive despite a few more favorable years, knows a substantial balance: oil and derivatives, coffee, fruit and vegetables, metals, engines and spare parts for motor vehicles, textile fibers constitute the main exports; the import mainly concerns foodstuffs, mechanical, electromechanical and chemical industry products. The closest relations are with the US, which supplies well over half of the imports and absorbs almost all of the exports.

MINERAL RESOURCES. – The mining industry has traditions that date back to the colonial era. The area that stretches from the North-West to the State of Chiapas is the largest supplier of copper; the eastern one, on the Gulf of Mexico, essentially produces oil, natural gas and sulfur; the central area gives silver, lead and zinc. With 3000 tons extracted (2006), Mexico is the second largest producer of silver in the world (main mines in Pachuca, in the Hidalgo, and in Parral, in Chihuahua) and among the first of lead. Gold, iron, manganese, tungsten, antimony, salt, natural phosphates and others are also extracted. Poorly endowed with coal, Mexico has rich oil fields: to the N, with the wells of Reynosa and Tampico; in the Center, in Ebano-Pánuco, Tuxpan and Poza Rica; in the S to Angostura, Puerto México and Minatitlán. New deposits have been discovered in the states of Veracruz, Baja California, Tabasco and Chiapas. Oil production rose to 163 million t of crude oil in 2006, to which must be added approximately 43 million m 3 of natural gas. Over 15,000 km of pipelines transfer oil and derivatives to refineries (Minatitlán, Poza Rica, Atzacapotzalco, Salina Cruz, Tula, Monterrey, etc.) and to ports, while gas is distributed through 22,700 km of pipelines to metropolitan centers. The richness of hydrocarbons is the basis of the thermoelectric potential (which in humid regions is flanked by hydroelectricity, which is slightly less important).

Mexico Economy Policy