Mexican Economy

Mexico has a free market economy, and is firmly established as an upper middle-income country with the highest per capita income in nominal terms in Latin America, and it is the 13th largest economy as measured in Gross Domestic Product in purchasing power parity. After the 1994 economic debacle, Mexico has made an impressive recovery, building a modern and diversified economy. Recent administrations have also improved infrastructure and opened competition in seaports, railroads, telecommunications, electricity generation, natural gas distribution and airports.

Many of the positive effects in poverty reduction and the increase in purchasing power of the middle class are attributed to the macroeconomic stability pursued by the last two administrations. GDP annual average growth for the period of 1995-2002 was 5.1%. The economic downturn in the United States also caused a similar pattern in Mexico, of which it rapidly recovered to grow 4.1% in 2005 and 3% in 2005. Inflation has reached a record low of 3.3% in 2005, and interest rates are low, which have spurred credit-consumption in the middle class. The Fox administration also provided monetary stability: budget deficit was further reduced and foreign debt was decreased to less than 20% of GDP. Mexico shares with Chile the highest rating of long-term sovereign credit in Latin America.

Being one of the most open countries in the world, almost 90% of Mexican trade has been put under free trade agreements with over 40 countries, of which the North American Free Trade Agreement remains the most influential: close to 90% of Mexican exports go to the United States and Canada, and close to 55% from its imports come from these two countries. Other major trade agreements have been signed with the European Union, Japan, Israel and many countries in Central and South America.

Tourism in Mexico is a large industry, the third in importance. The most notable tourist draws are the ancient Meso-American ruins, and popular beach resorts. The coastal climate and unique culture also make Mexico attractive. The peak tourists seasons in Mexico are during December and during July and August, with brief surges during the week before Easter and surges during spring break at many of the beach resort sites which are popular with vacationing college students from the United States.