2018 Index of Economic Freedom

Mexico

overall score64.8
world rank63
Rule of Law

Property Rights58.6

Government Integrity26.9

Judicial Effectiveness39.0

Government Size

Government Spending78.1

Tax Burden75.7

Fiscal Health69.8

Regulatory Efficiency

Business Freedom67.5

Labor Freedom59.8

Monetary Freedom79.2

Open Markets

Trade Freedom88.0

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 122.3 million
  • GDP (PPP):
    • $2.3 trillion
    • 2.5% growth
    • 2.5% 5-year compound annual growth
    • $18,938 per capita
  • Unemployment:
    • 4.0%
  • Inflation (CPI):
    • 2.8%
  • FDI Inflow:
    • $26.7 billion
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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.

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Background

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.

Rule of LawView Methodology

Property Rights 58.6 Create a Graph using this measurement

Government Integrity 26.9 Create a Graph using this measurement

Judicial Effectiveness 39.0 Create a Graph using this measurement

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.

Government SizeView Methodology

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.

Regulatory EfficiencyView Methodology

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.

Open MarketsView Methodology

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.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada77.7-0.8
2United States75.70.6
3Chile75.2-1.3
4Uruguay 69.2-0.5
5Jamaica 69.1-0.4
6Colombia68.9-0.8
7Peru68.7-0.2
8Saint Vincent and the Grenadines67.72.5
9Saint Lucia67.62.6
10Panama 670.7
11Costa Rica 65.60.6
12Mexico64.81.2
13Dominica64.50.8
14Guatemala 63.40.4
15The Bahamas63.32.2
16El Salvador 63.2-0.9
17Paraguay 62.1-0.3
18Dominican Republic61.6-1.3
19Honduras 60.61.8
20Nicaragua 58.9-0.3
21Guyana58.70.2
22Trinidad and Tobago57.7-3.5
23Belize57.1-1.5
24Barbados572.5
25Haiti55.86.2
26Argentina52.31.9
27Brazil51.4-1.5
28Ecuador48.5-0.8
29Suriname48.10.1
30Bolivia44.1-3.6
31Cuba31.9-2.0
32Venezuela 25.2-1.8
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