2014 Index of Economic Freedom

Mexico

overall score66.8
world rank55
Rule of Law

Property Rights50.0

Freedom From Corruption29.7

Limited Government

Government Spending78.9

Fiscal Freedom80.9

Regulatory Efficiency

Business Freedom76.8

Labor Freedom58.3

Monetary Freedom77.4

Open Markets

Trade Freedom85.6

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 114.9 million
  • GDP (PPP):
    • $1.8 trillion
    • 3.9% growth
    • 1.6% 5-year compound annual growth
    • $15,312 per capita
  • Unemployment:
    • 4.8%
  • Inflation (CPI):
    • 4.1%
  • FDI Inflow:
    • $12.7 billion
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Mexico’s economic freedom score is 66.8, making its economy the 55th freest in the 2014 Index. Its score is slightly lower than last year, with a notable improvement in trade freedom offset by declines in the areas of regulatory efficiency and government size and intrusiveness. Mexico is ranked 3rd out of three countries in the North America region, but its score is well above the world average.

Over the 20-year history of the Index, Mexico has advanced its economic freedom score by nearly 4 points. Improvements in half of the 10 economic freedoms include strong gains in fiscal freedom, business freedom, trade freedom, and financial freedom. Double-digit declines in property rights and freedom from corruption have limited overall progress. Mexico’s economy has generally been rated “moderately free” in the Index, dropping below that level only briefly in the late 1990s.

Despite some progress, Mexico’s overall economic freedom is still constrained by institutional weaknesses including corruption and labor market rigidity. The government’s reform agenda has been extensive, but progress has been sluggish. The judicial system is slow to resolve cases and vulnerable to corruption.

Background

The Institutional Revolutionary Party (PRI), which ruled Mexico for 71 years before the election of center-right National Action Party Presidents Vicente Fox (2000–2006) and Felipe Calderon (2006–2012), returned to power under President Enrique Peña Nieto, who took office on December 1, 2012. In his first year, Peña Nieto made commitments to second-generation reforms in education, energy, telecommunications, and fiscal policy. It is too early to tell whether his government will go far enough to make the economy truly competitive. Foreign investment rebounded in the first quarter of 2013, bringing in $4.99 billion, and emigration to the U.S. has slowed, but Mexico still struggles with formal-sector unemployment and poverty. Drug trafficking remains a serious problem.

Rule of LawView Methodology

Property Rights 50.0 Create a Graph using this measurement

Freedom From Corruption 29.7 Create a Graph using this measurement

Corruption is deeply embedded culturally and remains pervasive at all levels of society, fed by and entrenching the power of monopolists, party bosses, and other mafias. Billions of narco-dollars enter Mexico each year from the U.S., affecting politics particularly at the state and local levels. Contracts are generally upheld, but courts are inefficient and vulnerable to political interference.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 30 percent. The corporate income tax is set to decline to 29 percent in 2014 and 28 percent in 2015. Other taxes include a value-added tax (VAT). The overall tax burden is 10.6 percent of gross domestic income. Government spending equates to 27 percent of GDP, and public debt is equal to 43 percent of domestic output. The new government has proposed a tax overhaul.

Regulatory EfficiencyView Methodology

The overall start-up process has been simplified, and no minimum capital is required. Launching a business takes six procedures and six days on average, but licensing requirements take over two months to complete. A recent labor reform bill was watered down to protect unions. The government has announced ambitious energy and fiscal reform plans but has yet to make many needed changes to reduce subsidies.

Open MarketsView Methodology

Mexico has a 2.2 percent average tariff rate, and non-tariff barriers have been reduced unilaterally and through numerous trade agreements. The government restricts foreign investment in several sectors of the economy. Reforms have strengthened the regulatory framework and increased openness in the financial system, but domestic bank credit to the private sector equals less than 20 percent of GDP.

Country's Score Over Time

Bar Graph of Mexico Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Mexico to other economic country groups

Regional Ranking

rank country overall change
1Canada80.20.8
2United States75.5-0.5
3Mexico66.8-0.2


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