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- GDP (PPP):
- $2.3 trillion
- 2.5% growth
- 2.5% 5-year compound annual growth
- $18,938 per capita
- Inflation (CPI):
- FDI Inflow:
Mexico’s economic freedom score is 64.8, making its economy the 63rd freest in the 2018 Index. Its overall score has increased by 1.2 points, with improvements in trade freedom, investment freedom, and fiscal health outpacing declines in business freedom and government integrity. Mexico is ranked 12th among 32 countries in the Americas region, and its overall score is above the regional and world averages.
Mexico’s $2 trillion economy has quadrupled in size since the 1994 North American Free Trade Agreement. The government continues to emphasize economic restructuring, passing and implementing, for example, sweeping energy, financial, fiscal, and telecommunications reform legislation with the long-term aim of improving competitiveness and economic growth across the economy. Growth is constrained by lower oil production, weak oil prices, low productivity, a still-large informal sector that employs over half of the workforce, weak rule of law, and corruption.
Mexico is one of the most important countries in Latin America. The center-left Institutional Revolutionary Party governed the country continuously for 70 years until being defeated by the center-right National Action Party in 2000. The PRI regained the presidency under current President Enrique Peña Nieto, whose single six-year term runs through 2018. His focus is on implementing ambitious structural reforms adopted in 2013–2014. With drug-related crime rising, perennial left-wing candidate Andrés Manuel López Obrador of the Democratic Revolution Party may be well positioned to compete in the July 2018 presidential election. The PRD faces longer odds in winning a majority in Congress, however, and this makes radical policy shifts that would threaten macroeconomic stability less likely.
Property rights are protected by a modern legal framework, and records are digitized, but both are made less secure by a weak judicial system, frequent demands for bribes, and acts of criminal extortion. The delays, unpredictability, and corruption that plague the justice system and law enforcement in general encourage a culture of impunity. Corruption is deeply embedded throughout society and fed by billions of narco-dollars.
The top individual income tax rate is 35 percent, and the corporate tax rate is 30 percent. Other taxes include a value-added tax. The overall tax burden equals 17.4 percent of total domestic income. Over the past three years, government spending has amounted to 27.0 percent of total output (GDP), and budget deficits have averaged 3.8 percent of GDP. Public debt is equivalent to 58.1 percent of GDP.
Mexico has made dealing with construction permits costlier by increasing several fees but has improved the electricity supply’s reliability by installing smart meters. Informal employment, increased by rigid labor laws, distorts labor market dynamics, contributes to persistent wage depression, and drags down overall productivity. In 2017, the government deregulated gasoline and diesel prices and took steps to reduce electricity subsidies.
Trade is significant for Mexico’s economy; the combined value of exports and imports equals 78 percent of GDP. The average applied tariff rate is 1.0 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. Despite the challenging global environment, the financial sector has become more competitive and open. Banking remains relatively stable, and foreign participation has grown rapidly.