- GDP (PPP):
- $2.6 trillion
- -0.1% growth
- 2.1% 5-year compound annual growth
- $20,411 per capita
- Inflation (CPI):
- FDI Inflow:
Mexico’s economic freedom score is 65.5, making its economy the 65th freest in the 2021 Index. Its overall score has decreased by 0.5 point, primarily because of a decline in trade freedom. Mexico is ranked 11th among 32 countries in the Americas region, and its overall score is above the regional and world averages.
The Mexican economy remained in the moderately free category this year. Although President López Obrador has launched several high-profile investigations, corruption remains a serious problem. Mexico’s scores on judicial effectiveness and government integrity are on par with those of an average developing country, not an emerging market. More reforms to liberalize labor laws are needed.
IMPACT OF COVID-19: As of December 1, 2020, 106,765 deaths had been attributed to the pandemic, and Mexico’s economy was forecast to contract by 9.0 percent for the year.
In 2018, Andrés Manuel López Obrador of the MORENA party won a landslide victory, and his party took control of Congress, marking the first time a third-party candidate has controlled either branch of government. López Obrador inherited a deeply violent country, entrenched political and economic interests that often collaborate with transnational drug cartels, and sluggish economic growth. As president, he has pursued anticorruption measures while also implementing nationalistic economic policies such as reversing his predecessor’s education and energy reforms, has supported the U.S.–Mexico–Canada trade agreement, and has faced pressure from the United States to stop the flow of migrants from Central America’s northern triangle. Nearly 60 percent of economic activity takes place in the informal sector.
The law protects property rights, but corruption causes enforcement to be uneven. Property registration is problematic. The semi-independent judicial system is enfeebled by delays and other problems. Frequent solicitation of bribes by bureaucrats and officials, widespread impunity, and the high incidence of criminal extortion undermine the rule of law. Corruption has long been a problem in Mexico and is exacerbated by billions of narco-dollars.
The top individual income tax rate is 35 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax. The overall tax burden equals 16.1 percent of total domestic income. Government spending has amounted to 25.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.9 percent of GDP. Public debt is equivalent to 53.4 percent of GDP.
Operating a business has become more difficult. In Mexico City, construction permits are more difficult to obtain, and fees are higher. The formal labor market lacks depth because of Mexico’s high rate of labor informality. The government continues to subsidize the highly indebted and inefficient state-owned oil company, PEMEX, heavily.
Mexico has 23 preferential trade agreements in force. The trade-weighted average tariff rate is 4.2 percent, and 246 nontariff measures are in effect. Foreign direct investment is permitted in the vast majority of the economy, but certain key sectors are still reserved for the state. The banking sector, majority foreign owned, remains relatively well capitalized, but less than 40 percent of adult Mexicans have access to a formal banking account.