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- GDP (PPP):
- $1.7 trillion
- 4.0% growth
- 1.4% 5-year compound annual growth
- $14,610 per capita
- Inflation (CPI):
- FDI Inflow:
Mexico’s economic freedom score is 67.0, making its economy the 50th freest in the 2013 Index. Its score is 1.7 points better than last year, reflecting notable improvements in investment freedom, trade freedom, and monetary freedom. Mexico is ranked 3rd out of three countries in the North America region, but its score is well above the world average.
The Mexican economy has shown a moderate degree of resilience in the face of a challenging global economic environment. Reform efforts have continued in many areas related to economic freedom. Implementation of policies intended to support open markets and encourage a vibrant private sector has enhanced investment flows and the vitality of entrepreneurship, although growth remains sluggish. The 2012 labor reform bill, which aimed to increase labor market flexibility, was weakened by amendments to protect the country’s powerful unions.
Mexico has lagged notably in promoting the rule of law and strengthening the legal framework. The judicial system remains vulnerable to political interference, and property rights are not strongly protected. Corruption further undermines long-term institutional competitiveness. Recent years’ expansionary public spending threatens fiscal sustainability. The reform agenda addressing these shortcomings has been extensive, but progress has been marginal.
In the years following the end of the 71-year rule of the Institutional Revolutionary Party (PRI), center-right National Action Party Presidents Vicente Fox (2000–2006) and Felipe Calderon (2006–2012) hoped to make Mexico more globally competitive, but neither was able to end monopoly power in key sectors of the economy. PEMEX, the state-owned oil company, is but one example. Consumers are also at the mercy of dominant players in telecommunications, chemicals, electricity, beer, and cement, to name a few. The PRI will try again, under President Enrique Peña Nieto, who took office on December 1, 2012, and has pledged to modernize the Mexican state.
Respect for the rule of law has deteriorated as drug trafficking and related violence continue to rage out of control, especially in northern Mexico. Contracts are generally upheld, but courts are inefficient and vulnerable to political interference. Despite a legal framework covering intellectual property rights, prosecution of infringement is ineffective. Corruption remains pervasive at all levels of society.
The top income and corporate tax rates, temporarily raised from 28 percent to 30 percent starting in 2010, will be lowered to 29 percent in 2013 and 28 percent in 2014. Other taxes include a value-added tax (VAT). The overall tax burden equals about 9.6 percent of GDP. Government spending is now equivalent to 26.2 percent of total domestic output, and budget deficits are widening. Public debt remains below 50 percent of GDP.
The regulatory framework has been reformed to facilitate entrepreneurial activity. With no minimum capital required, launching a business involves six procedures. However, completing licensing requirements still costs over three times the level of annual average income. The recent labor reform bill was watered down to protect unions. Inflation has moderated, averaging below 4 percent over the most recent three years.
The trade-weighted average tariff rate is 6.1 percent, and extensive non-tariff barriers increase the cost of trade. Despite a strong desire to attract more foreign investment, the investment regime is inefficient and hampered by violence and instability. The financial sector has become more competitive and open in spite of the challenging global environment. Banking remains relatively stable, and foreign participation has grown rapidly.